<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HADSON CORPORATION
(Name of Registrant as Specified In Its Charter)
HADSON CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:(1)
4) Proposed maximum aggregate value of transaction:
_______________________________________________________________
(1) Set forth the amount on which the filing fee is calculated and
state how it was determined.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
_______________________
2) Form, Schedule or Registration Statement No.:
_______________________
3) Filing Party:
_______________________
4) Date Filed:
_______________________
<PAGE> 2
HADSON
================================================================================
PRELIMINARY COPY
April __, 1994
Dear Stockholder:
You are cordially invited to attend the 1994 Annual Meeting of
Stockholders (the "Annual Meeting") of Hadson Corporation (the "Company") which
will be held at the Loews Anatole Hotel, Chambers Room, 2201 Stemmons Freeway,
Dallas, Texas, on Thursday, May 26, 1994, at 10:00 a.m., local time.
The Notice of Annual Meeting and Proxy Statement accompanying this
letter provide information concerning matters to be considered and acted upon
at the Annual Meeting. Whether or not you plan to attend the Annual Meeting,
please carefully read these materials and complete, date and return the
enclosed proxy in the enclosed postage-paid envelope. Regardless of the number
of shares you own, your presence at the Annual Meeting, in person or by proxy,
is important for establishing a quorum, and your vote on the matters to be
considered at the Annual Meeting is important. Even if you have returned a
signed proxy, you may still attend the Annual Meeting and vote in person on all
matters presented for stockholder vote at the Annual Meeting on which you are
entitled to vote.
Thank you for your continued interest in the Company. We look
forward to personally greeting as many of our stockholders as possible at the
Annual Meeting.
Sincerely,
GREG G. JENKINS
President and Chief Executive Officer
HADSON CORPORATION
101 Park Avenue/Suite 1400/P.O. Box 26770/Oklahoma City, OK 73126-6770
Telephone (405) 235-9531 / Telex 796136
<PAGE> 3
PRELIMINARY COPY
HADSON CORPORATION
2777 STEMMONS FREEWAY, SUITE 700
DALLAS, TEXAS 75207
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, MAY 26, 1994
To the Stockholders of
HADSON CORPORATION:
NOTICE IS HEREBY GIVEN that the 1994 Annual Meeting of Stockholders
(the "Annual Meeting") of Hadson Corporation (the "Company") will be held at
the Loews Anatole Hotel, Chambers Room, 2201 Stemmons Freeway, Dallas, Texas,
on Thursday, May 26, 1994, at 10:00 a.m., local time, for the following
purposes:
1. To elect three directors to Class I of the Board of Directors
to serve until the 1997 Annual Meeting of Stockholders and
until their successors have been elected and qualified;
2. To approve a March 9, 1994 amendment and restatement of the
Hadson Corporation 1992 Equity Incentive Plan, as amended;
3. To approve a proposed amendment to the Company's Restated
Certificate of Incorporation to increase the authorized number
of shares of Common Stock, $.01 par value, of the Company from
35,000,000 shares to 50,000,000 shares; and
4. To transact such other business as may properly come before
the Annual Meeting or any adjournment(s) thereof.
The close of business on March 28, 1994 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting or any adjournment(s) thereof.
BY ORDER OF THE BOARD OF DIRECTORS
TERRI MCGUIRE WATSON
Secretary
Dallas, Texas
April __, 1994
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED, POSTAGE
PREPAID ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF
YOU DO ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON OR BY PROXY.
<PAGE> 4
PRELIMINARY COPY
HADSON CORPORATION
2777 STEMMONS FREEWAY, SUITE 700
DALLAS, TEXAS 75207
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1994
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Hadson Corporation, a Delaware corporation (the
"Company"), of proxies to be voted at the 1994 Annual Meeting of Stockholders
of the Company (the "Annual Meeting") to be held May 26, 1994, and any and all
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting. This Proxy Statement and the accompanying Notice of Annual
Meeting and form of proxy were first mailed on or about April ___, 1994 to
holders of record of the Company's Common Stock, par value $.01 per share
("Common Stock"), as of the close of business on March 28, 1994, the record
date fixed by the Board of Directors of the Company (the "Board of Directors")
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date").
The cost of soliciting proxies will be borne by the Company, including
expenses in connection with the preparation, printing and mailing of this Proxy
Statement and all proxy soliciting material which now accompanies or may
hereafter supplement it. The solicitation of proxies by the Board of Directors
will be conducted primarily by mail. However, proxies also may be solicited by
personal interview, telephone and telegram by directors, officers and employees
of the Company. The Company will supply brokers and other nominees, custodians
and fiduciaries with the number of proxies and proxy materials as they may
require for mailing to beneficial owners of the Common Stock, and may reimburse
them for their reasonable expenses in connection therewith. The Company's
transfer agent, Liberty Bank & Trust Company of Oklahoma City, N.A., will aid
in the dissemination of these proxy materials to such persons, who will be
requested to forward such materials to such beneficial owners.
A copy of the Company's Annual Report, including consolidated
financial statements, was previously mailed to each holder of record of the
Common Stock on the Record Date and provided to brokers and other nominees,
custodians and fiduciaries for mailing to beneficial owners of Common Stock at
the Company's expense.
VOTING INFORMATION
The presence, in person or by proxy, of a majority of the shares of
Common Stock outstanding on the Record Date is required for a quorum for the
transaction of business at the Annual Meeting. Each holder of Common Stock is
entitled to one vote for each share held on the Record Date on all matters on
which such holder is entitled to vote. The Common Stock is the only class of
outstanding securities of the Company entitled to notice of and to vote at the
Annual Meeting.
When properly executed and returned, a proxy will be voted as
designated thereon by the stockholder. IF NO CHOICE IS SPECIFIED IN THE PROXY,
THE PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS DESCRIBED HEREIN, AND WILL BE
VOTED IN THE DISCRETION OF THE PERSONS NAMED IN THE PROXY IN CONNECTION WITH
ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
A proxy, even though executed and returned, may be revoked at any time
prior to the voting of the proxy (i) by the later execution and submission of
another proxy, (ii) by written notice to the Secretary of the
<PAGE> 5
Company or (iii) by voting in person at the Annual Meeting. In the absence of
such revocation, shares represented by properly executed proxies will be voted
at the Annual Meeting.
At the Annual Meeting, three directors are to be elected to Class I of
the Board of Directors. Proxies cannot be voted for a greater number of
persons than the number of nominees named on the enclosed form of proxy. A
plurality of the votes cast in person or by proxy by the holders of the Common
Stock entitled to vote at the Annual Meeting is required to elect a director.
Accordingly, under Delaware law, the Company's Restated Certificate of
Incorporation (the "Restated Certificate") and bylaws, abstentions and "broker
non-votes" will not have the same legal effect as a vote against a particular
director. A "broker non-vote" occurs if a broker or other nominee does not
have discretionary authority to vote on and has not received instructions with
respect to a particular proposal. Holders of Common Stock are not entitled to
cumulate their votes in the election of directors.
Approval of the March 9, 1994 amendment and restatement of the Hadson
Corporation 1992 Equity Incentive Plan, as previously amended, requires the
affirmative vote of a majority of the outstanding shares of Common Stock
present, in person or by proxy, and entitled to vote at the Annual Meeting (the
1992 Equity Incentive Plan as previously amended is referred to herein as the
"Equity Incentive Plan" and the March 9, 1994 amendment and restatement of the
Equity Incentive Plan is referred to herein as the "Amended Equity Incentive
Plan"). Under Delaware law, the Restated Certificate and the Company's bylaws,
an abstention will have the same legal effect as a vote against the proposal to
approve the Amended Equity Incentive Plan, even though this may not be the
intent of the person voting or giving a proxy; each "broker non-vote" will not
have the legal effect of a vote against this proposal, and will reduce the
absolute number, but not the percentage, of affirmative votes necessary for
approval of the Amended Equity Incentive Plan.
Approval of the amendment to the Restated Certificate requires the
affirmative vote of a majority of the shares of Common Stock outstanding on the
Record Date. Under Delaware law, the Restated Certificate and the Company's
bylaws, abstentions and "broker non-votes" will have the same legal effect as a
vote against this proposal.
On the Record Date, there were outstanding 25,689,147 shares of Common
Stock. As of the Record Date, Santa Fe Energy Resources, Inc. ("Santa Fe") was
the record holder of approximately 40.47% of the outstanding shares of Common
Stock, and The Prudential Insurance Company of America and certain of its
affiliates (collectively, "Prudential") were the record holders of
approximately [5.18%] of the outstanding shares of Common Stock and had the
right to direct the voting of an additional [19.40%] of the outstanding shares
of Common Stock.
On December 14, 1993, in connection with the merger of Adobe Gas
Pipeline Company ("AGPC"), then an indirect, wholly-owned subsidiary of Santa
Fe, with and into the Company (the "Merger"), Santa Fe and Prudential entered
into a voting agreement (the "Voting Agreement"). Pursuant to the Voting
Agreement, each of Santa Fe and Prudential has agreed to vote the shares of
Common Stock beneficially owned by it following the Merger in favor of (i) the
persons designated from time to time by Santa Fe for election as directors of
the Company, provided that the number of directors of the Company holding
office at any time (assuming the election of such designees) who have been
designated by Santa Fe shall not be greater than 50% of the total number of
directors of the Company; (ii) any one person designated from time to time by
Prudential for election as a Class I director of the Company; and (iii) any one
person jointly designated from time to time by Santa Fe and Prudential for
election as a Class III director of the Company.
2
<PAGE> 6
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
The Board of Directors currently consists of eight persons. Under the
Restated Certificate, the Board of Directors is divided into three classes,
Classes I, II, and III. Each director serves for a term expiring at the third
annual meeting of stockholders following the annual meeting at which the
director was elected, except that the term of the directors who were first
elected to Class I expires at the Annual Meeting, the term of the directors who
were first elected to Class II will expire at the 1995 Annual Meeting of
Stockholders and the terms of the directors who were first elected to Class III
will expire at the 1996 Annual Meeting of Stockholders.
At the Annual Meeting, the holders of Common Stock will elect three
directors to Class I of the Board of Directors, to serve until the 1997 Annual
Meeting of Stockholders and until their successors have been elected and
qualified. Messrs. James A. Bitzer, J. Frank Haasbeek and Michael J. Rosinski
currently serve as the Class I directors and have been nominated for
re-election as such. Each of such nominees is a designee of either Santa Fe or
Prudential pursuant to the Voting Agreement. See "Voting Information" and
"Beneficial Ownership of Securities." For additional information concerning
such nominees, see "Nominees for Election to Board of Directors -Class I."
The nominees named above have indicated their willingness to serve for
their terms, but, if any of the nominees are unable or should decline to serve
as a director at the date of the Annual Meeting, it is the intention of the
persons named in the proxy to vote for such other person or persons as they in
their discretion shall determine.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
NOMINEES NAMED BELOW FOR ELECTION TO THE BOARD OF DIRECTORS. PROXIES SOLICITED
BY THE BOARD OF DIRECTORS WILL BE SO VOTED AS DIRECTED IN THE FORM OF PROXY OR,
IF NO DIRECTION IS INDICATED, FOR EACH OF THE NOMINEES NAMED BELOW. A
PLURALITY OF THE VOTES CAST IN PERSON OR BY PROXY BY THE HOLDERS OF THE COMMON
STOCK ENTITLED TO VOTE IS REQUIRED TO ELECT A DIRECTOR. SEE "VOTING
INFORMATION."
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS - CLASS I
(FOR A TERM ENDING AT THE 1997 ANNUAL MEETING OF STOCKHOLDERS)
<TABLE>
<CAPTION>
NAME AND AGE, PRINCIPAL DIRECTOR
OCCUPATION AND OTHER INFORMATION SINCE
-------------------------------- --------
<S> <C>
JAMES A. BITZER (30) has served since 1991 as Second Vice President of 1993
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 such entity. 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. Mr. Bitzer is considered to be a designee of
Prudential pursuant to the Voting Agreement.
J. FRANK HAASBEEK (59) serves as President and Chief Executive 1993
Officer and a director 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
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
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. Mr. Haasbeek is a citizen of Canada. Mr. Haasbeek is
considered to be a designee of Santa Fe pursuant to the Voting Agreement.
MICHAEL J. ROSINSKI (49) serves as Vice President and Chief Financial 1993
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. ("Tenneco") and its subsidiaries for 24 years. From 1988
until 1990, he served with Tenneco as Deputy Project Executive for the
Columbian Crude Oil Pipeline Project and from 1990 until August 1992 he was
Executive Director of Investor Relations for Tenneco. Mr. Rosinski is
considered to be a designee of Santa Fe pursuant to the Voting Agreement.
</TABLE>
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE - CLASS II
(TERM ENDING AT THE 1995 ANNUAL MEETING OF STOCKHOLDERS)
<TABLE>
<CAPTION>
NAME AND AGE, PRINCIPAL DIRECTOR
OCCUPATION AND OTHER INFORMATION SINCE
-------------------------------- --------
<S> <C>
GREG G. JENKINS (36) serves as President of the Company, a position he 1993
has held since December 17, 1993, and Chief Executive Officer of the
Company, a position he has held since March 21, 1994. Mr. Jenkins became
employed by the Company on October 1, 1993 and served as Chief Operating
Officer of the Company from December 17, 1993 until he was elected as
Chief Executive Officer. Prior to joining the Company, 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.
JAMES L. PAYNE (57) is Chairman of the Board, President and Chief 1993
Executive Officer of Santa Fe, positions he has held since June 1990.
Mr. Payne was President of Santa Fe Energy Company, a predecessor in
interest of Santa Fe, from January 1986 to January 1990 when he became
President of Santa Fe. From 1982 to 1986, Mr. Payne was Senior Vice
President -- Exploration and Land of Santa Fe Energy Company. Mr. Payne
also serves as a director of Santa Fe and as a director of Pool Energy
Services Co. Mr. Payne is considered to be a designee of Santa Fe
pursuant to the Voting Agreement.
B. M. THOMPSON (61) is a private investor and was employed in various 1993
capacities by Phillips Petroleum Company ("Phillips") and its
subsidiaries from 1954 to 1992. He served on the Phillips' board of
directors for four years, and retired in 1992 as Chairman of the Board and
Chief Executive Officer of GPM Gas Corporation, a subsidiary of Phillips
that processes natural gas.
</TABLE>
4
<PAGE> 8
Mr. Thompson also serves as a director of Noble Drilling Co. Mr. Thompson
is considered to be a designee of Santa Fe pursuant to the Voting
Agreement.
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE - CLASS III
(TERM ENDING AT THE 1996 ANNUAL MEETING OF STOCKHOLDERS)
<TABLE>
<CAPTION>
NAME AND AGE, PRINCIPAL DIRECTOR
OCCUPATION AND OTHER INFORMATION SINCE
-------------------------------- --------
<S> <C>
J. MICHAEL ADCOCK (45) currently practices law in Shawnee, Oklahoma. 1981
He served as President and Chief Operating Officer of the Company
from March 9, 1990 to December 15, 1993 and Chief Executive Officer from
September 8, 1992 to December 15, 1993. Mr. Adcock served as the
Company's General Counsel from 1983 to 1990 and as its Secretary from 1980
to 1990. For at least one year prior to his election in March 1990 as
President and Chief Operating Officer, Mr. Adcock was a principal in the
law firm of Diamond, Adcock, Stuart & Timmons. Mr. Adcock is considered
to be a joint designee of Santa Fe and Prudential pursuant to the Voting
Agreement.
J. E. "BUCK" CANNON (60) was elected to the office of Chairman of the 1994
Board and as a director of the Company on March 21, 1994. Mr. Cannon has
been an independent energy consultant since January 1991. From January
1987 through December 1990, Mr. Cannon served as Executive Vice President
for all operating subsidiaries of American Oil and Gas Corporation. Mr.
Cannon served as a director of American Oil and Gas Corporation from June
1987 through December 1990. Mr. Cannon is considered to be a joint
designee of Santa Fe and Prudential pursuant to the Voting Agreement.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Board Meetings. The Board of Directors held 12 meetings in 1993,
including seven which were held by telephone conference. Each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors held during the period in which he was a director and
(ii) the total number of meetings held by all committees on which he served
during the period that he served on such committees. The Board of Directors
has a standing Audit Committee, Nominating Committee and Compensation
Committee.
Committees of the Board. The Audit Committee is currently composed of
Messrs. Haasbeek, Thompson and Rosinski. Prior to December 14, 1993, the Audit
Committee was composed of Messrs. Harry G. Hadler, Walter C. Wilson and S. D.
Wilks, C.B. each of whom was a former director of the Company and resigned upon
consummation of the Merger on December 14, 1993. The function of the Audit
Committee is to review the financial statements of the Company, to determine
whether the Company is following accepted accounting procedures, to review
selected transactions with management and to review the internal audit
procedures and the adequacy of the Company's internal accounting and financial
controls. The Audit Committee also recommends the independent auditors and
their remuneration for approval by the Board of Directors. The Audit Committee
did not meet during 1993.
The Nominating Committee is currently composed of Messrs. Adcock,
Cannon and Rosinski. Prior to December 14, 1993, the Nominating Committee was
composed of Messrs. Adcock and Wilks. The functions of the Nominating
Committee are to consider and make recommendations to the Board of Directors
with respect to proposed new members of the Board of Directors and to nominate
the individuals whom the Nominating Committee considers qualified to stand for
election as directors at each annual meeting of the
5
<PAGE> 9
Company's stockholders. The Nominating Committee will no longer consider
nominees recommended by holders of Common Stock for the election of Class I
directors at the Annual Meeting. The Nominating Committee will consider
nominees recommended by a holder of Common Stock for election of Class II
directors at the 1995 Annual Meeting of Stockholders if such nominations are
submitted in accordance with the guidelines and time set forth under
"Stockholder Proposals and Other Matters" herein. The Nominating Committee did
not meet during 1993.
The Board of Directors has delegated to the Compensation Committee
responsibility for reviewing officers' compensation and administering the
Company's incentive compensation plans. The Compensation Committee also
administers the Equity Incentive Plan. The Compensation Committee is composed
of Messrs. Payne, Thompson and Bitzer. Prior to December 14, 1993, the
Compensation Committee was composed of Messrs. Hadler, Wilson and Wilks. The
Compensation Committee met one time during 1993.
BENEFICIAL OWNERSHIP OF SECURITIES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 25, 1994, with
respect to any person (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended), who is known to
the Company to be the beneficial owner of more than 5% of the Common Stock, the
only class of voting securities of the Company.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Ownership
of Common Stock
----------------------------
Name and Address Number of Percent of
of Beneficial Owner Shares Class
------------------- ---------- ---------
<S> <C> <C>
The Prudential Insurance Company of
America (1) 6,317,944 24.60%
Prudential Plaza
Newark, NJ 07102-3777
Elliot Associates, L.P. (2) 2,142,719 8.34%
110 East 59th Street
New York, NY 10022
Santa Fe Energy Resources, Inc. (3) 10,395,655 40.47%
1616 South Voss Road, Suite 1000
Houston, Texas 77057
The H/P Trust (4) 4,983,180 19.40%
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 Schedule 13D dated January 7, 1994 and filed with the Securities
and Exchange Commission (the "Commission"). Includes 1,329,763 shares of
Common Stock directly owned by Prudential; 5,001 shares of Common Stock,
which Prudential has the right to acquire upon the exercise of the shares
of the Junior Exercisable Automatically Convertible Preferred Stock,
Series B, par value $.01 per share ("Junior Preferred"), which it owns;
and 4,983,180 shares of Common Stock held by a trust (the "H/P Trust")
established in connection with the Merger to which the Company transferred
such number of shares of Common Stock immediately following the Merger,
over which shares Prudential has voting control and
6
<PAGE> 10
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 (the "Trust
Agreement"). See footnote (4) below.
(2) Based on information obtained by the Company from Elliot Associates, L.P.
on March 24, 1994. Includes 1,251,576 shares of Common Stock which Elliot
Associates, L.P. owns directly and 891,143 shares of Common Stock which
Elliot Associates, L.P. has the right to acquire upon the exercise of the
shares of the Junior Preferred, which it owns.
(3) Based on Amendment No. 1 to Schedule 13D dated March 17, 1994 and filed
with the Commission.
(4) 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 has the right to direct the voting of such shares.
See footnote (1) above.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of December 31, 1993,
with respect to the beneficial ownership of the Common Stock and the Junior
Preferred by (i) each director of the Company, (ii) each nominee for director
of the Company, (iii) each executive officer of the Company, and (iv) all
directors and executive officers of the Company as a group. None of such
persons beneficially owns any shares of the Company's Senior Cumulative
Preferred Stock, Series A, par value $.01 per share, the only other class of
equity securities of the Company.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
-------------------------------------------------------
Junior Exercisable
Automatically Convertible
Common Stock Preferred Stock, Series B
-------------------------- --------------------------
Number of Percent of Number of Percent of
Name of Beneficial Owner Shares Class Shares Class
------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
J. Michael Adcock (1) 34,211 * 2,149 *
B. M. Thompson (2) 6,667 * -- *
James L. Payne (2) 6,667 * -- *
Michael J. Rosinski (2)(3) 11,667 * -- *
J. Frank Haasbeek (2) 6,667 * -- *
James A. Bitzer (4) -- * -- *
Greg G. Jenkins -- * -- *
Robert P. Capps (5) 29,601 * 560 *
Robert L. Laughman (6)(7) 27,385 * 141 *
C. Jeff Goodell (8)(9) 29,904 * 620 *
All executive officers and directors
as a group (11 persons) 155,816 * 3,547 *
</TABLE>
____________________
* Less than 1%.
(1) The number of shares of Common Stock beneficially owned includes: 406
shares owned directly; 101 shares issuable upon the exercise of shares of
Junior Preferred owned directly; 2,848 shares held for his account under
the Hadson Corporation Employee 401(k) Savings Plan (the "401(k) Plan");
649 shares issuable upon the exercise of shares of Junior Preferred held
for his account under the 401(k) Plan; 2,141 shares held by Mr. Adcock's
wife; 1,399 shares issuable upon the exercise of shares of Junior
Preferred held by Mr. Adcock's wife; and 26,667 shares subject to stock
options granted under the Equity Incentive Plan. The number of shares of
Junior Preferred beneficially owned includes 101 shares held directly; 649
shares held for his account under the 401(k) Plan; and 1,399 shares held
by Mr. Adcock's wife. Mr. Adcock resigned as President and Chief
Executive Officer of the Company effective December 15, 1993 and as an
employee of the Company effective December 31, 1993.
7
<PAGE> 11
(2) Subject to stock options granted to such a person as a nonemployee
director, pursuant to the Equity Incentive Plan.
(3) Includes 5,000 shares held directly by Mr. Rosinski and 6,667 shares
subject to stock options granted under the Equity Incentive Plan.
(4) Mr. Bitzer was automatically granted stock options as a nonemployee
director pursuant to the Equity Incentive Plan. Mr. Bitzer immediately
forfeited such options and waived all future grants of awards under such
plan (in accordance with the internal policies of Prudential, his
employer).
(5) The number of shares of Common Stock beneficially owned includes: 2,374
shares held for his account under the 401(k) Plan; 560 shares issuable
upon the exercise of shares of Junior Preferred held for his account under
the 401(k) Plan; and 26,667 shares subject to options granted under the
Equity Incentive Plan. The number of shares of Junior Preferred
beneficially owned consists of 560 shares held for his account under the
401(k) Plan.
(6) The number of shares of Common Stock beneficially owned includes: 577
shares held for his account under the 401(k) Plan; 141 shares issuable
upon the exercise of shares of Junior Preferred held for his account under
the 401(k) Plan; and 26,667 shares subject to options granted under the
Equity Incentive Plan. The number of shares of Junior Preferred
beneficially owned consists of 141 shares held for his account under the
401(k) Plan.
(7) Mr. Laughman resigned from the Company effective September 1, 1993.
(8) The number of shares of Common Stock beneficially owned includes 2,617
shares held for his account under the 401(k) Plan; 620 shares issuable
upon the exercise of shares of Junior Preferred held for his account under
the 401(k) Plan; and 26,667 shares subject to options granted under the
Equity Incentive Plan. The number of shares of Junior Preferred
beneficially owned consists of 620 shares held for his account under the
401(k) Plan.
(9) Mr. Goodell resigned from the office of Executive Vice President - Natural
Gas Liquids of the Company effective December 17, 1993. He currently
serves as Chief Operating Officer of a subsidiary of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
To the Company's knowledge, based solely on a review of the copies of
reports furnished to the Company and written representations of all directors
and executive officers that no other reports were required with respect to
their beneficial ownership of Common Stock during 1993, the Company's directors
and executive officers and all beneficial owners of more than 10% of the
Company's equity securities complied with all applicable filing requirements
under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to their beneficial ownership of Common Stock
during 1993, with the exception of Mr. Rosinski, who filed one Form 4 late, and
Santa Fe, which filed one Form 4 late. As indicated in the table under "--
Security Ownership of Certain Beneficial Owners" above, the H/P Trust may be
deemed to be the beneficial owner of the shares of Common Stock indicated in
such table. The H/P Trust has not made any filing under Section 16(a) of the
Exchange Act.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE MERGER
The Merger was consummated on December 14, 1993. 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. Pursuant to the Merger, all
of the outstanding common stock of AGPC (which was then owned by a subsidiary
of Santa Fe) was converted into 2,080,000 shares of the Company's Senior
Cumulative Preferred Stock, Series A, par value $.01 per share, and 10,395,665
shares of Common Stock. Prior to the Merger, AGPC entered into the Gas
Contract described below.
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<PAGE> 12
GAS CONTRACT
Prior to the Merger, AGPC entered into a gas contract (the "Gas
Contract") with Santa Fe and Santa Fe Energy Operating Partners, L.P.
("SFEOP"). 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 the purchase of natural
gas under the Gas Contract fluctuates from month to month based on generally
recognized published price indices. Under other provisions of the Gas
Contract, the Company is 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.
The term of the Gas Contract will run from December 14, 1993 through
March 31, 2001. However, either the Company or Santa Fe and SFEOP will have
the right to terminate the Gas Contract upon a material breach of the terms
thereof or the occurrence of certain governmental actions. In addition, Santa
Fe and SFEOP will have the right to terminate the Gas Contract upon the
occurrence of certain other events, including the failure of the Company to
purchase specified percentages of available production.
The Company will be required to release production dedicated under the
Gas Contract under certain circumstances, including (i) if Santa Fe or SFEOP
reasonably believes 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 does not provide financial assurance
(such as letters of credit) acceptable to Santa Fe and SFEOP for the value of
such gas. In addition, Santa Fe and SFEOP have the right to limit, curtail or
shut-in dedicated production for any reason.
Prior to December 14, 1993, the effective date of the Gas Contract,
the Company and certain of its subsidiaries purchased natural gas from Santa Fe
and certain of its subsidiaries, including SFEOP and AGPC. For 1993,
purchases from Santa Fe totalled approximately $36.9 million, which amount
includes approximately $9.7 million from AGPC. The Gas Contract replaces and
supersedes all prior gas purchase agreements between certain of the Company's
subsidiaries and Santa Fe and certain of its subsidiaries.
Mr. Payne is a director and executive officer of Santa Fe, and Mr.
Rosinski is an executive officer of Santa Fe.
CERTAIN PAYMENTS MADE IN CONNECTION WITH THE MERGER
Prior to the consummation of the Merger, the Company and Mr. Adcock
(who was then President and Chief Executive Officer of the Company) entered
into an amendment to Mr. Adcock's employment agreement with the Company
pursuant to which Mr. Adcock (i) resigned as an officer, but not as a director,
of the Company effective as of December 15, 1993, (ii) agreed to remain as an
employee of the Company until December 31, 1993 and (iii) agreed that the
severance payment of approximately $682,000 that became payable to him pursuant
to his employment agreement as a result of the Merger and such resignation will
be payable in 72 equal semi-monthly installments (provided that any unpaid
installments will become immediately due and
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<PAGE> 13
payable in a lump sum if Mr. Adcock ceases to be a member of the Board of
Directors for any reason other than his resignation or removal for cause).
Such amendment also provided for the extension of Mr. Adcock's stock option
agreement to the fifth anniversary of the Merger. See "Management
Compensation."
In addition, the Company paid Mr. Adcock a cash bonus of $35,000 upon
consummation of the Merger in recognition of his efforts on behalf of the
Company since 1991 and certain voluntary salary reductions taken by Mr. Adcock.
See "Management Compensation."
Mr. Adcock is a director of the Company.
DIAMOND, STUART & TIMMONS
Until December 17, 1993, Jeanette C. Timmons served as Secretary of
the Company. Until February 1, 1994, Ms. Timmons was a partner in the law firm
of Diamond, Stuart & Timmons, which provided legal services to the Company.
Prior to Mr. Adcock's election in March 1990 as President and Chief Operating
Officer of the Company, Mr. Adcock was also a partner in this law firm. Legal
fees and expenses incurred during 1993 and paid, as of December 31, 1993, to
Diamond, Stuart & Timmons by the Company on behalf of the Company and its
subsidiaries were approximately $87,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since December 17, 1994, the Compensation Committee of the Board of
Directors has consisted of Messrs. Bitzer, Payne and Thompson. As noted above,
Mr. Payne is a director and executive officer of Santa Fe. See "-- The Merger"
and "-- Gas Contract" above for information concerning certain transactions
between the Company and Santa Fe.
EXECUTIVE OFFICERS
The following sets forth certain information regarding the business
experience of the Company's executive officers.
J. E. "BUCK" CANNON was elected to the office of Chairman of the Board
of the Company on March 21, 1994. See "Members of Board of Directors
Continuing in Office - Class III."
GREG G. JENKINS serves as President of the Company, a position he has
held since December 17, 1993, and Chief Executive Officer of the Company, a
position he has held since March 21, 1994. Mr. Jenkins became employed by the
Company on October 1, 1993 and served as Chief Operating Officer of the Company
from December 17, 1993 until he was elected as Chief Executive Officer. See
"Members of the Board of Directors Continuing in Office - Class II."
ROBERT P. CAPPS serves as Executive Vice President, Chief Financial
Officer and Treasurer of the Company, positions he has held since January 1993,
June 1991 and June 1990, respectively. Mr. Capps also served as Senior Vice
President, Finance of the Company from June 1990 to January 1993, after serving
as Vice President and Controller (from June 1988 to June 1990).
MARTHA A. BURGER was elected Vice President -- Controller in January
1993. Ms. Burger has been employed by the Company since February 1989 as
Assistant Treasurer.
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<PAGE> 14
MANAGEMENT COMPENSATION
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth all
compensation paid by the Company for the year ended December 31, 1993 (i) to
the Company's former Chief Executive Officer, (ii) to the Company's current
Chief Executive Officer, and (iii) to the Company's executive officers whose
total annual salary and bonus for 1993 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
NAME OF INDIVIDUAL ANNUAL COMPENSATION SECURITIES ALL OTHER
AND --------------------------------------- UNDERLYING COMPENSATION
PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) OTHER($) OPTIONS(#) ($)
------------------- ---- --------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Adcock 1993 255,000 35,000 (1) -- -- 9,419 (2)
Former President and Chief 1992 275,000 685 306 400,000 (3) 10,395 (2)
Executive Officer, Director 1991 312,397 -- -- 15,000 (4) --
Greg G. Jenkins (5) 1993 42,500 -- -- -- --
President, Chief Executive 1992 -- -- -- -- --
Officer and Director 1991 -- -- -- -- --
Robert P. Capps 1993 163,500 35,000 (1) -- -- 8,584 (2)
Executive Vice President, Chief 1992 156,000 685 198 400,000 (3) 8,338 (2)
Financial Officer and 1991 156,000 -- -- 15,000 (4) --
Treasurer
Robert L. Laughman (6) 1993 131,193 -- -- -- 188,001 (7)
Executive Vice President - 1992 157,500 625 198 400,000 (3) 8,859 (2)
Natural Gas Operations 1991 157,500 25,000 -- -- --
C. Jeff Goodell (8) 1993 154,791 -- -- -- 8,513 (2)
Executive Vice President - 1992 147,420 625 864 400,000 (3) 8,114 (2)
Natural Gas Liquids Operations 1991 147,420 -- -- -- --
</TABLE>
____________________
(1) In connection with the Merger, the Company paid to each of Messrs.
Adcock and Capps a cash bonus of $35,000 in recognition of their
efforts on behalf of the Company since 1991 and, in the case of Mr.
Adcock, his prior voluntary salary reductions. Mr. Adcock elected to
defer receipt of the bonus until 1994. Mr. Adcock resigned as
President and Chief Executive Officer of the Company effective
December 15, 1993 and as an employee of the Company effective December
31, 1993.
(2) Includes matching contributions to the 401(k) Plan.
(3) Pursuant to the Reverse Stock Split, the number of shares subject to
option was reduced to 26,668 from 400,000.
(4) Pursuant to the Company's financial reorganization in 1992, these
options were cancelled effective December 16, 1992.
(5) Mr. Jenkins became employed by the Company on October 1, 1993 and was
elected President and Chief Operating Officer of the Company effective
December 17, 1993. As of March 21, 1994, Mr. Jenkins was named Chief
Executive Officer of the Company.
(6) Mr. Laughman resigned from the Company effective September 1, 1993.
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<PAGE> 15
(7) Includes (i) a $115,000 severance payment, (ii) $37,396 loan balance
which was forgiven at the time of Mr. Laughman's resignation, (iii)
$24,168 in accrued vacation pay and (iv) $11,437 of matching
contributions to the 401(k) Plan.
(8) Mr. Goodell resigned from the office of Executive Vice President -
Natural Gas Liquids of the Company effective December 17, 1993. He
currently serves as Chief Operating Officer of a subsidiary of the
Company.
Option Grants. No stock options were granted during 1993 to any of
the executive officers named in the Summary Compensation Table set forth above.
Options Exercised. No stock options were exercised during 1993 by any
of the executive officers named in the Summary Compensation Table set forth
above.
Employment Contracts. During 1990, the Company, or its subsidiaries,
entered into employment agreements with Messrs. Adcock, Capps, Laughman and
Goodell (the "Employment Agreements"). In December 1993, Mr. Adcock's
Employment Agreement was amended as described below, and, in March 1994, Mr.
Capps' Employment Agreement was amended and restate as described below. The
Employment Agreements with Messrs. Laughman and Goodell expired in April 1993.
The Employment Agreements provide, or provided, for (i) a term of employment of
five years in the case of Messrs. Adcock and Capps and three years in the case
of Messrs. Laughman and Goodell, and (ii) severance payments equivalent to
either (a) a multiple of the employee's highest base salary during the term of
his Employment Agreement upon termination of employment by the Company without
"cause" (as defined in such Employment Agreement) or by the employee for "good
reason" (as defined in such Employment Agreement), such multiple being 1.5 with
respect to Mr. Adcock, 1.0 with respect to Mr. Capps, and .5 with respect to
Messrs. Laughman and Goodell, or (b) a multiple of the employee's highest base
salary and annual bonus (2.0 in the cases of Messrs. Adcock and Capps and 1.5
in the cases of Messrs. Laughman and Goodell) in the event termination occurs
for any reason within one year after a "change of control" (as defined in such
Employment Agreement), limited, however, so that such payment will not result
in the imposition of an excise tax on so-called "golden parachute payments"
under section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"). Total cash compensation paid during 1993 under the Employment
Agreements is included in the Summary Compensation Table set forth above.
During 1991, Mr. Adcock twice effected voluntary reductions of his base salary,
such that his base annual salary decreased from $325,000 to $275,000; in
January 1993, Mr. Adcock effected a further voluntary reduction in his base
salary to $255,000.
Mr. Laughman resigned from the Company effective September 1, 1993.
In connection with his resignation, Mr. Laughman received a severance payment
of $115,000, as reflected in the Summary Compensation Table set forth above.
The consummation of the Merger resulted in a "change in control" as
defined in the Employment Agreements. Prior to the consummation of the Merger,
the Company and Mr. Adcock entered into an amendment to Mr. Adcock's Employment
Agreement pursuant to which Mr. Adcock (i) resigned as an officer, but not as a
director, of the Company effective as of December 15, 1993, (ii) agreed to
remain as an employee of the Company until December 31, 1993 and (iii) agreed
that the severance payment of approximately $682,000 that became payable to him
pursuant to his Employment Agreement as a result of the Merger and such
resignation will be payable in 72 equal semi-monthly installments (provided
that any unpaid installments will become immediately due and payable in a lump
sum if Mr. Adcock ceases to be a member of the Board of Directors for any
reason other than his resignation or removal for cause). Such amendment also
provides for the extension of Mr. Adcock's stock option agreement to the fifth
anniversary of the Merger.
Pursuant to his Employment Agreement, Mr. Capps would have been
entitled to a severance payment of approximately $409,000 if his employment
with the Company were terminated within one year after the Merger. Mr. Capps
has waived such payment pursuant to his amended and restated employment
agreement referred to above. In March 1994, the Company also entered
into an employment agreement with Mr. Jenkins. These new agreements (together,
the "New Employment Agreements") provide (i) for a term of
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<PAGE> 16
employment of two years, renewable automatically for successive one-year
periods unless either party gives notice to the other that no such renewal
shall occur, and (ii) a severance payment equivalent to two times the total of
(a) the amount of the employee's highest annual base salary plus (b) the amount
of the employee's highest annual bonus during the term of the New Employment
Agreement if the employee's employment is terminated by the Company in breach
of such agreement or by the employee under specified circumstances, and (iii)
that each agreement covering an award pursuant to the Equity Incentive Plan
will provide that all stock options will become exercisable, and all
restrictions on all restricted stock awards will lapse, immediately upon the
occurrence of the events described in the preceding clause (ii). Any payments
made pursuant to the New Employment Agreements are limited so that such payment
will not result in the imposition of an excise tax on so-called "golden
parachute payments" under Section 280G(b)(2) of the Code.
Compensation of Directors. During 1993, nonemployee directors
received an annual fee of $20,000 each, payable in four equal quarterly
installments, plus $1,000 for each Board of Directors' meeting attended in
person. Directors who were also full-time employees of the Company received a
fee of $100 for each Board of Directors' meeting attended, but received no
other remuneration for services as members of the Board of Directors. In
addition, during 1993, Mr. Wilson, a former director of the Company who resigned
effective December 14, 1993, received a payment in the amount of $5,000 related
to his services in interviewing, retaining and supervising investment bankers
in connection with the Merger.
Additionally, nonemployee directors receive automatic,
non-discretionary grants of options to purchase shares of Common Stock pursuant
to the Equity Incentive Plan. Pursuant to such plan, at the time of their
appointment as directors, each of Messrs. Thompson, Payne, Rosinski, Haasbeek
and Bitzer received an automatic grant of options to purchase 6,667 shares of
Common Stock at an exercise price of $2.34 per share as adjusted to reflect the
one-for-15 reverse stock split of the Common Stock effected by the Merger (the
"Reverse Stock Split"). Mr. Bitzer immediately forfeited such options and
waived all future grants of awards under such plan (in accordance with the
internal policies of Prudential, his employer).
In connection with the resignations of Messrs. Hadler, Wilks and
Wilson as directors of the Company, the Company awarded each such resigning
director a special one-time grant of an option to purchase 6,667 shares of
Common Stock at an exercise price of $2.38 per share in recognition of the many
years of service of such persons as directors of the Company. Said options and
exercise price have been adjusted to reflect the Reverse Stock Split.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Board of Directors has delegated to the Compensation Committee
responsibility for reviewing officers' compensation and administering the
Company's incentive compensation plans. The Compensation Committee also
administers the Equity Incentive Plan. All decisions of the Compensation
Committee relating to the compensation of the Company's executive officers
(other than grants of awards under the Equity Incentive Plan) are approved and
ratified by the Board of Directors.
COMPENSATION ELEMENTS FOR 1993
The Company's overall compensation program is designed to enhance
corporate performance and stockholder value by aligning the financial interests
of the executive officers with those of its stockholders. For 1993 and for
some period of time prior to 1993, the compensation of the Company's executive
officers consisted primarily of: (1) base salary, adjusted from the prior year;
(2) discretionary bonuses based upon individual performance; and (3)
discretionary stock option grants under the Equity Incentive Plan.
Base Salary. In determining executive officers' base salary levels,
the Company strives to maintain levels that are competitive with those of
comparable companies. Each officer's experience and anticipated
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<PAGE> 17
contribution to the Company's profitability also are considered when
establishing a base salary. The salary levels of certain executive officers
were increased slightly for 1993, following two years with no increase for the
majority of the officers.
During 1993, the Company analyzed a comparison of all employees'
salaries with those salaries paid by comparable companies. The Company's
analysis was based on a survey prepared by Hay and Associates. The Company
chose this particular survey because it contained information from companies
engaged in lines of business deemed to be most similar to the Company's
business. The survey revealed that the Company's salary levels, in general,
tended to be below the market. As a result, during 1993 the Company adjusted
the salaries of certain key employees for the purpose of retaining qualified
and experienced employees.
Cash Bonuses. No general bonus program was provided for executive
officers during 1993. Upon the recommendation of the Board of Directors,
bonuses were paid for 1993 to the Company's former Chief Executive Officer and
to the Company's Chief Financial Officer based on individual performance. The
amounts of the bonuses were based on those individuals' efforts in completing
the Company's financial reorganization in 1992, the resolution of certain
litigation between the Company and the U.S. Army, the successful negotiation
and consummation of the Merger and, in the case of the former Chief Executive
Officer, in recognition of voluntary salary reductions in prior years.
Stock Options. Employees are eligible for participation in the Equity
Incentive Plan, which is administered by the Compensation Committee. Under the
Equity Incentive Plan, employees, including the executive officers, are
granted, from time to time, stock options to purchase shares of Common Stock at
a per share exercise price based on the fair market value of the Common Stock
on the date of grant.
NEW COMPENSATION PLAN AND COMPENSATION ELEMENTS FOR 1994
The Compensation Committee recently recommended, and the Board of
Directors approved, a new Incentive Compensation Plan ("ICP") for the executive
officers and a certain group of key employees. The ICP will be effective
beginning with the year ending December 31, 1994. For 1994, the compensation
of the Company's executive officers will consist primarily of (1) base salary,
adjusted from 1993; (2) discretionary bonuses based on the ICP; and (3)
discretionary stock option grants and restricted stock awards under the Amended
Equity Incentive Plan (if approved by stockholders of the Company).
ICP Elements. Bonus awards granted under the ICP will range from 10%
to 60% of base pay. A maximum bonus amount is set for each participant by the
Compensation Committee, upon recommendations from management, at the beginning
of each year. The actual amount of the bonus for each participant is based
upon the attainment of annual Company growth targets in the following areas,
with each being weighted 25%: (i) natural gas marketing margins; (ii) natural
gas marketing volumes; (iii) consolidated cash flow, defined as earnings before
interest, taxes, depreciation and amortization; and (iv) stock price
appreciation based on a peer group of companies. The attainment levels for the
first three factors described above, and the percentage of the maximum bonus to
be awarded of such levels are attained as follows:
Percentage
Actual results as of maximum
compared to goals bonus earned
----------------- ------------
Less than 90% 0
90% 50%
100% 75%
110% 100%
Stock appreciation will be on a basis of zero for performance within the bottom
one-third of the peer group, 50% for performance within the middle one-third of
the peer group and 100% for performance within the top one-third of the peer
group. One-half of each bonus will paid in cash and one-half will be paid
through the
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<PAGE> 18
issuance of a number of shares of the Company's Common Stock having a fair
market value (determined as of the date the bonus is awarded) equal to one-half
of the total bonus amount. The ICP Plan provides that such shares may not be
transferred (otherwise than by will or the laws of descent) or distributed for
a period of six months after the date the bonus is awarded.
CEO COMPENSATION
Mr. Adcock served as the Company's Chief Executive Officer from
September 1992 until his resignation effective December 15, 1993. The Company
and Mr. Adcock entered into an Employment Agreement during 1990. Pursuant to
the Employment Agreement, Mr. Adcock's annual base salary was $325,000.
Subsequently, Mr. Adcock voluntarily reduced his salary such that for 1992 his
base salary was $275,000. Effective January 1, 1993, Mr. Adcock voluntarily
reduced his annual base salary to $255,000. The annual base salary set forth
in the Employment Agreement was based on subjective factors designed to align
the Chief Executive Officer's salary with the market and to reflect his
position and responsibility.
Because of Mr. Adcock's dedication to and performance on behalf of the
Company, including his role in the Company's financial reorganization in 1992
and in negotiating and consummating the Merger, and his voluntary salary
reductions, the Board of Directors voted to award a cash bonus of $35,000 to
Mr. Adcock upon the completion of the Merger. Mr. Adcock elected to defer
the payment of such bonus to 1994.
In March 1994, the Company and Mr. Jenkins, who was named
as the Company's Chief Executive Officer effective March 21, 1994, entered into
an Employment Agreement. The Employment Agreement is discussed in "Management
Compensation -- Employment Contracts."
SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")
The Compensation Committee has reviewed the implications of Section
162(m) of the Code, effective for taxable years beginning on or after January 1,
1994, which generally disallows a tax deduction to public companies for
compensation over $1 million paid in any taxable year to the Company's chief
executive officer and four other most highly compensated executive officers, as
reported in the Company's proxy statement. Qualifying performance-based
compensation will not be subject to the deduction limit if certain requirements
are met. One of such requirements is that certain determinations regarding the
performance-based compensation be made by a committee of outside directors. The
Equity Incentive Plan includes certain provisions designed to assist awards
granted under such plan to qualify for the performance-based compensation
exception. Under regulations recently proposed by the Internal Revenue Service,
however, certain members of the Compensation Committee may not constitute
"outside directors" as defined in such proposed regulations. Such regulations
have not yet become final. If such regulations are adopted, awards granted
under this Plan would not be eligible for the performance-based compensation
exception. The Compensation Committee believes that it is unlikely that
compensation in excess of $1 million will be paid to any individual in any
taxable year in the near future.
COMPENSATION COMMITTEE
JAMES L. PAYNE, CHAIRMAN
B. M. THOMPSON
JAMES A. BITZER
COMPARISON OF TOTAL STOCKHOLDER RETURN
The following graph compares the yearly percentage change in the
cumulative total stockholder return on the Common Stock with the Standard &
Poor's 400 Stock Index and a peer group of five natural gas marketing companies
for the period from January 1, 1989 through December 31, 1993, assuming the
reinvestment of all dividends.
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<PAGE> 19
PERFORMANCE GRAPH
PEER GROUP
S&P 400 HADSON COMPOSITE(1)
------- ------ ------------
January 1, 1989 ................... 100.00 100.00 100.00
December 31, 1989 ................... 121.78 75.00 160.79
December 31, 1990 ................... 116.27 35.71 154.70
December 31, 1991 ................... 144.68 19.64 177.35
December 31, 1992 ................... 154.75 6.25 243.71
December 31, 1993 ................... 163.03 5.00 390.99
(1) This group of companies currently includes American Oil and Gas
Corporation, Associated Natural Gas Corporation, Eastex Energy, Inc., KCS
Energy, Inc. and Tejas Gas Corporation.
PROPOSAL TO APPROVE THE AMENDED EQUITY INCENTIVE PLAN
(ITEM 2 ON THE PROXY CARD)
GENERAL
The Hadson Corporation 1992 Equity Incentive Plan was adopted by the
Company to attract and retain quality employees and directors for the Company
and its subsidiaries. This plan was approved pursuant to the Company's 1992
voluntary reorganization proceeding under Chapter 11 of the United States
Bankruptcy Code upon confirmation by the bankruptcy court of the Company's plan
of reorganization, and became effective on December 16, 1992. On December 14,
1993, the Company's stockholders approved an amendment and restatement of this
plan adopted by the Board of Directors as of November 5, 1993, the primary
purpose of which was to increase the number of shares available for issuance
under the plan from 300,000 to 633,365 (in each case as adjusted to reflect the
Reverse Stock Split). The Equity Incentive Plan provides for the grant of
awards only in the form of options to purchase shares of Common Stock.
On March 9, 1994, the Board of Directors approved the Amended Equity
Incentive Plan, subject to stockholder approval, which, among other things, (i)
increases the maximum number of shares of Common Stock issuable pursuant to
awards granted under the plan from 633,365 to 3,900,000, (ii) increases the
maximum number of shares issuable pursuant to awards granted to nonemployee
directors under the plan from 500,000 (as adjusted to reflect the Reverse Stock
Split) to 1,000,000, (iii) increases the maximum number of shares subject to
awards granted each year to any one individual under the plan from 66,670 (as
adjusted to reflect the Reverse Stock Split) to 500,000 and (iv) provides for
the granting of awards of restricted stock, in each case as described further
below.
The following is a summary of the Equity Incentive Plan and the
proposed amendments thereto to be effected pursuant to the Amended Equity
Incentive Plan. Except as otherwise indicated, the provisions of the Amended
Equity Incentive Plan are the same as the provisions of the Equity Incentive
Plan. The description of the Amended Equity Incentive Plan does not purport to
be complete and is qualified in its entirety by reference to the form of the
Amended Equity Incentive Plan set forth in Appendix I to this Proxy Statement.
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<PAGE> 20
DESCRIPTION OF THE EQUITY INCENTIVE PLAN
General. The Equity Incentive Plan provides for the grant of options
to purchase shares of Common Stock. Options granted under the Equity Incentive
Plan may be either (i) options intended to qualify as "incentive stock options"
under section 422 of the Code or (ii) "nonstatutory stock options" that are not
intended to qualify as incentive stock options under the Code. As of December
31, 1993, options to purchase a total of 218,533 shares of Common Stock were
outstanding (of which 156,244 shares were vested) and 414,832 shares of Common
Stock remained reserved and available for issuance under the Equity Incentive
Plan.
Eligibility. Any employee or director of the Company or of any parent
or subsidiary of the Company is eligible to receive awards under the Equity
Incentive Plan, provided that incentive stock options may only be granted to
employees (including any officer or director who is an employee) of the Company
or of any such parent or subsidiary. At December 31, 1993, approximately 198
persons (including nonemployee directors) were eligible to participate in the
Equity Incentive Plan.
Shares Subject to the Equity Incentive Plan. The maximum aggregate
number of shares which may be issued pursuant to the exercise of options
granted under the Equity Incentive Plan is 633,365, subject to adjustment under
certain circumstances, including stock dividends, stock splits, reverse stock
splits, reorganizations and recapitalizations. If the Amended Equity Incentive
Plan is approved, the number of shares issuable pursuant to awards granted
under the Plan (whether stock options or restricted stock awards) will be
increased to 3,900,000, subject to adjustment as described above. If, for any
reason, any outstanding option under the Equity Incentive Plan expires or is
terminated before exercise or is forfeited, the shares of Common Stock
allocable to the unexercised portion of the option grant shall again become
available for issuance under the Equity Incentive Plan. The Amended Equity
Incentive Plan provides that, if any portion of a restricted stock grant is
forfeited, the shares of Common Stock allocable to the forfeited portion of the
restricted stock grant shall again become available for issuance under the
Amended Equity Incentive Plan.
Administration. The Equity Incentive Plan is administered by the
Compensation Committee of the Board of Directors. Under the terms of the
Equity Incentive Plan, the members of the Compensation Committee are required
to be (i) "disinterested" within the meaning of Rule 16b-3 ("Rule 16b-3")
under the Exchange Act and (ii) "outside directors" within the meaning of
Section 162(m) of the Code ("Section 162(m)"). Under regulations proposed by
the Internal Revenue Service in December 1993 (the "Proposed Regulations"), an
"outside director" is defined as a person who (i) is not a current or former
employee or executive officer of a corporation (including any entity included
in any affiliated group of corporations within the meaning of Section 1504 of
the Code) and (ii) does not receive remuneration, directly or indirectly, in
any capacity other than as a director. Under the Proposed Regulations,
indirect remuneration would include any payments made to an entity in which the
director has a beneficial ownership interest of more than 50%, as well as
payments in excess of specified amounts made to an entity by which the director
is employed or in which the director has a beneficial ownership interest of at
least 5% but not more than 50%. Thus, a given person might qualify as a
"disinterested director" but not as an "outside director" within the meaning of
the Proposed Regulations. Certain members of the Compensation Committee may
not constitute outside directors as so defined. Accordingly, in order to
ensure that the plan will be administered in accordance with Rule 16b-3, the
Amended Equity Incentive Plan will remove the requirement that the Compensation
Committee members be "outside directors." Subject to the provisions of the
Equity Incentive Plan governing participation by nonemployee directors, the
Compensation Committee determines the eligible persons to whom awards will be
granted, the terms of such awards and the number of shares subject to such
awards.
The Equity Incentive Plan also provides that the maximum number of
shares of Common Stock with respect to which options may be granted to any
participant during any calendar year shall not exceed 66,670, as adjusted for
the Reverse Stock Split. If approved, the Amended Equity Plan will provide
that the maximum number of shares of Common Stock with respect to which options
and restricted stock awards may be granted to any participant during any
calendar year shall not exceed 500,000.
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Terms and Conditions of Options. Options granted under the Equity
Incentive Plan may have a maximum term of 10 years (five years in the case of
an incentive stock option granted to a holder of more than 10% of the total
combined voting power of all classes of stock of the Company or any subsidiary
or parent corporation of the Company). The per-share exercise price of options
is the fair market value of the Common Stock (110% of such fair market value in
the case of an incentive stock option granted to a holder of more than 10% of
the total combined voting power of all classes of stock of the Company or any
subsidiary or parent corporation of the Company) on the date of the grant. To
the extent required by the Code, the aggregate fair market value (determined as
of the date of grant) of stock with respect to which incentive stock options
are exercisable for the first time by any employee during any calendar year
(under all plans of the Company and any parent or subsidiary of the Company)
may not exceed $100,000. Options are not transferable except upon death, and
can be exercised during the optionee's lifetime only by the optionee or his or
her guardian or legal representative. The Compensation Committee shall
determine the effect on an option granted to a person, other than a nonemployee
director, of such person's disability, death, retirement or other termination
of employment.
Subject to certain limitations, and except with respect to options
held by nonemployee directors, the Compensation Committee may amend, modify or
terminate outstanding options, including substituting therefor another option
of the same or a different type and changing the date of exercise or vesting.
Each option may have additional terms and conditions consistent with the Equity
Incentive Plan, as determined by the Compensation Committee.
Terms and Conditions of Restricted Stock Grants. As noted above, the
Amended Equity Incentive Plan provides for awards of shares of Common Stock,
subject to restrictions. Common Stock subject to restrictions awarded pursuant
to the Amended Equity Incentive Plan is referred to as "Restricted Stock."
Subject to the provisions of the Amended Equity Incentive Plan governing
participation by nonemployee directors, the Compensation Committee determines
the number of shares of Restricted Stock that are subject to a grant and the
restrictions on such shares, which may include, among other things, transfer
restrictions, restrictions on the right to vote the shares and restrictions on
the right to receive dividends on the shares. The Compensation Committee may,
but is not required to, award Restricted Stock grants based upon the attainment
of "performance goals," as defined in Section 162(m). Upon issuance, each
certificate evidencing shares of Restricted Stock is required to be deposited
with the Company, together with a stock power executed in blank, until all
restrictions on the shares have lapsed. Prior to the lapse of all
restrictions, shares of Restricted Stock are not transferable except upon
death. The Compensation Committee shall determine the effect on a Restricted
Stock award granted to a person, other than a nonemployee director, of such
person's disability, death, retirement or other termination of employment.
Subject to certain limitations, and except with respect to Restricted
Stock held by nonemployee directors, the Compensation Committee may amend,
modify or terminate any outstanding grant of Restricted Stock, including
substituting therefor another Restricted Stock grant of the same or a different
type and changing the time or times at which any restrictions shall lapse.
Each grant of Restricted Stock may have additional terms and conditions
consistent with the Amended Equity Incentive Plan, as determined by the
Compensation Committee.
Accelerating Events. Unless otherwise provided in the grant, options
granted to executive officers and directors of the Company will become
immediately vested and exercisable in full (and, if the Amended Equity
Incentive Plan is approved, all restrictions on all shares of Restricted Stock
will immediately lapse) upon the occurrence of any of the following events: (i)
delivery of written notice of a meeting of the Company's stockholders to
consider a merger, sale of substantially all of the assets or similar
reorganization of the Company; (ii) the acquisition of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) by any person (other than the
Company or Prudential or any of its affiliates) of securities representing 25%
or more of the total number of votes that may be cast for the election of the
Company's directors; (iii) commencement of a tender offer for stock of the
Company; or (iv) subject to certain exceptions, failure of any person nominated
by the Company to be elected to the Board of Directors at any annual or special
meeting involving an election contest. In addition, if a change of control
occurs, the Compensation Committee may in its discretion take one
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or more of the following actions with respect to optionees (or, if applicable,
holders of Restricted Stock) other than nonemployee directors: (i) provide for
the acceleration of any time period relating to the exercise or vesting of an
option (or the lapse of restrictions on shares of Restricted Stock); (ii)
provide for the purchase of an option upon the optionee's request for an amount
of cash or other property that could have been received upon the exercise of
the option had the option been currently exercisable; (iii) cause the option
(or grant of Restricted Stock) to be assumed, or new rights substituted
therefor, by another entity; or (iv) adjust the terms of an option (or grant of
Restricted Stock) as may be determined by the Compensation Committee or make
such other provision as the Compensation Committee may consider equitable.
Grants to Nonemployee Directors. The maximum aggregate number of
shares of Common Stock that may be issued pursuant to options granted to
nonemployee directors under the Equity Incentive Plan is 66,670. Pursuant to
the terms of the Equity Incentive Plan, on December 16, 1992, each nonemployee
director then in office was automatically granted an option to purchase 50,000
shares of Common Stock at an exercise price of $.23 per share, the fair market
value of the Common Stock on such date. The number of shares subject to
unexercised options and the exercise price of such shares were adjusted in
connection with the Reverse Stock Split. Thereafter, upon the initial election
or appointment of a person who is not an employee of the Company or any parent
or subsidiary of the Company as a director of the Company, such person will
automatically be granted an option to purchase 6,667 shares of Common Stock.
In addition, on the date of each annual stockholders' meeting, each nonemployee
director who is re-elected to the Board of Directors shall automatically be
granted an option to purchase an additional 666 shares of Common Stock. The
exercise price of each option granted to nonemployee directors is equal to the
fair market value of the Common Stock on the grant date. The term of each
option granted to a nonemployee director is 10 years, subject to termination or
extension in accordance with the Equity Incentive Plan, and each such option is
exercisable in full for the period commencing on the date of the grant and
continuing until three years after a person ceases to be a director for any
reason other than for cause. A nonemployee director shall be considered to
have been dismissed "for cause" in the event he or she is dismissed on account
of any act of (i) fraud or intentional misrepresentation or (ii) embezzlement,
misappropriation, or conversion of assets or opportunities of the Company or
any subsidiary of the Company. In the event a nonemployee director ceases to
be a director for cause, options then held by such person will terminate
immediately. The automatic grants are structured so that the recipients may
qualify as disinterested administrators of the Equity Incentive Plan under Rule
16b-3.
If approved, the Amended Equity Incentive Plan will increase from
500,000 to 1 million the maximum aggregate number of shares that may be issued
to nonemployee directors pursuant to options and Restricted Stock awards. The
Amended Equity Incentive Plan provides for an annual grant of Restricted Stock
to each nonemployee director in an amount equal to 50% of the annual retainer
fee payable for such person's services as a director in lieu of such portion of
the director's annual retainer fee. The amount of the annual retainer fee to
be paid to each nonemployee director for 1994 will total $20,000. Grants will be
made on the date of each annual meeting of stockholders of the Company,
beginning with the Annual Meeting to which this Proxy Statement relates. The
total number of shares of Restricted Stock to be awarded pursuant to each grant
shall be determined by dividing the portion of the director's fee to be paid in
the form of the grant by the fair market value of one share of Common Stock on
the date of the award. Restricted Stock granted to nonemployee directors may
not be sold, assigned, pledged, hypothecated or otherwise disposed of until at
least six months and one day after the date of grant, but will confer on the
grantee voting, dividend, liquidation and other rights of a holder of Common
Stock. In the event a nonemployee director ceases to be a director for cause
within six months after a grant of Restricted Stock, the director shall forfeit
all Restricted Stock subject to such grant.
Each of Messrs. Adcock, Bitzer, Haasbeek, Payne, Rosinski and Thompson
is a nonemployee director within the meaning of the Equity Incentive Plan. If
the Amended Equity Incentive Plan is approved, each of such persons will
automatically be granted, on the date of the Annual Meeting, a number of shares
of Restricted Stock having a fair market value, determined as of such date,
equal to $10,000 (one-half of the annual retainer payable to each such person
for the year commencing on the date of the Annual Meeting). If Messrs. Bitzer,
Haasbeek and Rosinski are re-elected as directors of the Company at the Annual
Meeting, each such person will automatically be granted, on the date of the
Annual Meeting, an option to purchase 666 shares
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of Common Stock at an exercise price equal to the fair market value of the
Common Stock on such date, whether or not the amended Equity Incentive Plan is
approved.
Termination or Amendment. The Equity Incentive Plan provides that the
Board of Directors may at any time terminate, suspend or amend the Equity
Incentive Plan, provided that no amendment shall be made to the Equity
Incentive Plan without stockholder approval if such approval is necessary to
comply with Rule 16b-3 the Code or other applicable laws or regulations.
Certain provisions relating solely to nonemployee directors may not be amended
more than once every six months other than to comport with changes in the Code
or the rules thereunder. Unless sooner terminated by the Board of Directors,
the Equity Incentive Plan will expire on December 16, 2002.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Non-Qualified Stock Options. As a general rule, no federal income tax
is imposed on an optionee upon the grant of a non-qualified stock option such
as those under the Equity Incentive Plan, and the Company is not entitled to a
tax deduction by reason of such a grant. Instead, an optionee is taxed upon
the exercise of the option, at ordinary income rates, on the excess of the fair
market value of the shares acquired (determined as of the date of exercise)
over the exercise price. Upon a subsequent disposition of the shares received
upon exercise of a non-qualified stock option, the difference between the
amount realized on the disposition and the basis of the stock (exercise price
plus any compensation income recognized) should qualify as long-term or
short-term capital gain, depending on whether the stock was held for more than
one year prior to disposition. If the stock received upon exercise of the
option is nontransferable and subject to a substantial risk of forfeiture, the
optionee will generally not be taxed upon the exercise of the option, but will
be taxed at ordinary income rates at the time the stock becomes transferable or
the risk of forfeiture lapses, unless the optionee elects under Section 83(b)
of the Code to be taxed at the time the option is exercised by filing an
election under Section 83(b) of the Code within 30 days of such exercise. If
such an election is made, the optionee will be taxed at ordinary income rates
on the difference between the exercise price and the fair market value of the
stock at the time of exercise. Any subsequent appreciation or depreciation in
the value of the stock would be subject to short-term or long-term capital
gains treatment upon the disposition of the stock. The Company will generally
be entitled to a tax deduction for the same taxable year and in the same amount
as any compensation is included in the optionee's income.
Incentive Stock Options. Incentive stock options are subject to
special federal income tax treatment. No federal income tax is imposed on an
optionee upon the grant or the exercise of an incentive stock option if the
optionee does not dispose of shares acquired pursuant to the exercise within
the two-year period beginning on the date the option was granted or within the
one-year period beginning on the date the option was exercised (collectively,
the "Holding Periods"), and the Company is not entitled to any deduction for
federal income tax purposes in connection with the grant or exercise of the
option or the disposition of the shares so acquired. However, the excess of
the fair market value of the purchased shares over the exercise price is an
item of tax preference to the optionee in the year of exercise for purposes of
the alternative minimum tax. Upon disposition of the stock after the Holding
Periods, the difference between the amount realized and the exercise price
should constitute long-term capital gain or loss.
If an optionee disposes of shares acquired pursuant to the exercise of
an incentive stock option prior to the end of the Holding Periods, the
disposition will be treated as a disqualifying disposition. The optionee will
be treated as having received, at the time of disposition, compensation taxable
as ordinary income equal to the excess of the fair market value of the shares
at the time of exercise (or in the case of a sale in which a loss would be
recognized, the amount realized on the sale, if less) over the exercise price
and any amount realized in excess of the fair market value of the shares at the
time of exercise will be treated as short-term or long-term capital gain,
depending on the holding period of the shares. In such event, the Company may
claim a deduction for compensation paid at the same time and in the same amount
as compensation is treated as received by the optionee.
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Restricted Stock. A grantee of shares of Restricted Stock will be
taxed, at ordinary income rates, at such time as a transfer of the shares would
no longer subject the grantee to liability under Section 16(b) of the Exchange
Act and the shares are otherwise transferable or not subject to a substantial
risk of forfeiture, whichever occurs first. The amount of compensation subject
to tax will be the fair market value of the shares at such time. Any
appreciation or depreciation in the value of the stock subsequent to the time
the value of the stock is included in the grantee's income will be subject to
short-term or long-term capital gains treatment upon disposition of the stock.
However, a grantee may elect to be taxed at the time of receipt of the shares
by filing an election under Section 83(b) of the Code within 30 days of receipt
of the shares. The Company will generally be entitled to a deduction for the
same taxable year and in the same amount as any compensation is included in the
grantee's income.
Section 162(m). Under Section 162(m), as enacted by the Omnibus
Budget Reconciliation Act of 1993 for tax years beginning on or after January
1, 1994, publicly held corporations cannot deduct compensation payments made to
certain employees for federal income tax purposes to the extent the employee's
compensation in any taxable year exceeds $1 million. The employees covered by
this provision include the chief executive officer of the subject corporation
and the four other highest compensated officers for the taxable year. In the
case of stock options and grants of restricted stock, the $1 million deduction
limitation does not apply to the extent such compensation is based on
performance goals if (i) the performance goals are established by a
compensation committee of the board of directors of the subject corporation
which is comprised solely of two or more outside directors and (ii) the
material terms under which the compensation is payable (including the
performance goals) are disclosed to the stockholders of the corporation and
approved by a majority vote of the stockholders before the compensation is
paid. The provisions of the Equity Incentive Plan (i) limiting the number of
shares of Common Stock with respect to which awards may be granted to any
participant during any calendar year and (ii) setting the option price per
share of Common Stock purchasable under an option at 100% of the fair market
value of the Common Stock on the date of the award (110% in the case of an
incentive stock option granted to a holder of more than 10% of the total
combined voting power of all classes of stock of the Company or any subsidiary
or parent of the Company) have been included to assist in qualifying options
granted under the Equity Incentive Plan for the performance-based exception
described above. However, as indicated above, awards to be granted under the
Equity Incentive Plan will not so qualify until such time as the Compensation
Committee that grants such awards is composed solely of outside directors
within the meaning of the Proposed Regulations.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE AMENDED EQUITY INCENTIVE PLAN. PROXIES SOLICITED BY
THE BOARD OF DIRECTORS OF THE COMPANY WILL BE SO VOTED AS DIRECTED IN THE FORM
OF PROXY OR, IF NO DIRECTION IS INDICATED, FOR THE APPROVAL OF THIS PROPOSAL.
FOR APPROVAL, THE PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY PRESENT AT THE ANNUAL MEETING
IN PERSON OR BY PROXY AND ENTITLED TO VOTE. SEE "VOTING INFORMATION."
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(ITEM 3 ON THE PROXY CARD)
The Board of Directors proposes that Article 4 of the Company's
Restated Certificate of Incorporation be amended to increase the number of
authorized shares of Common Stock from 35,000,000 to 50,000,000.
The Board of Directors believes that an increase in the number of
authorized shares of Common Stock to 50,000,000 is desirable in order that a
sufficient number of shares will be available for issuance from time to time
for such corporate purposes as may be authorized by the Board of Directors.
These corporate purposes might include, among other things, the raising of
additional capital funds through public or private offerings, the acquisition
by the Company of other companies or assets, the issuance of stock under the
Company's various employee stock plans, and the declaration of stock splits or
stock dividends. Such additional authorized shares of Common Stock would be
available for issuance as authorized from time to time by the Board of
Directors without a vote of stockholders except as required by applicable law,
rules and regulations.
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The Company has no specific plans or commitments for the issuance of
the additional shares of Common Stock proposed to be authorized other than
pursuant to awards granted or to be granted under stock plans maintained by the
Company for the benefit of its directors, officers and other employees.
The Board of Directors does not believe that an increase in the number
of authorized shares of Common Stock will have a significant impact on any
attempt to gain control of the Company. However, it is possible that the
availability of authorized but unissued shares of Common Stock could discourage
third parties from attempting to gain such control since the Board of Directors
could authorize the issuance of such shares, or rights with respect to such
shares, in a private placement or to existing stockholders in a manner which
could dilute the voting power of a person attempting to gain control of the
Company and increase the cost of acquiring such control.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION. PROXIES SOLICITED
BY THE BOARD OF DIRECTORS OF THE COMPANY WILL BE VOTED AS DIRECTED IN THE FORM
OF PROXY OR, IF NO DIRECTION IS INDICATED, FOR THE APPROVAL OF THIS PROPOSAL.
FOR APPROVAL, THIS PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
OUTSTANDING SHARES OF COMMON STOCK ENTITLED TO VOTE. SEE "VOTING INFORMATION."
STOCKHOLDER PROPOSALS AND OTHER MATTERS
The Management of the Company does not know of any other matters that
are to be presented for action at the Annual Meeting. Should any other matter
come before the meeting, however, the persons named in the enclosed proxy will
have discretionary authority to vote all proxies with respect to such matter in
accordance with their judgment.
The Audit Committee of the Company has selected, and the Board of
Directors has approved, Price Waterhouse as independent accountants to examine
the consolidated financial statements of the Company for 1994. Price
Waterhouse has served the Company in this capacity since August 8, 1989.
A representative of Price Waterhouse is expected to be present at the
Annual Meeting. Such person is not expected to make a statement at the meeting
but will have the opportunity to do so if he or she desires and will be
available to respond to appropriate questions from stockholders.
Proposals of a stockholder intended to be presented at the 1995 Annual
Meeting of Stockholders must be received by the Secretary of the Company at its
principal executive offices, together with notice of the intent of the
stockholder proponent to appear personally at such annual meeting to present
such proposal, not later than December ___, 1994. If not received by such
date, a stockholder proposal shall not be considered, pursuant to the rules and
regulations promulgated under the Exchange Act, for inclusion in the Company's
proxy statement and form of proxy relating to that meeting.
By Order of the Board of Directors
TERRI MCGUIRE WATSON
Secretary
April __, 1994
Dallas, Texas
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A COPY OF THE COMPANY'S ANNUAL REPORT CONTAINING THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1993 WAS MAILED TO THE
HOLDERS OF COMMON STOCK ON OR ABOUT MARCH 31, 1994. ANY HOLDER OF COMMON STOCK
WHO DID NOT RECEIVE THE COMPANY'S ANNUAL REPORT SHOULD MAKE A WRITTEN REQUEST
ADDRESSED TO TERRI MCGUIRE WATSON, CORPORATE SECRETARY, HADSON CORPORATION,
2777 STEMMONS FREEWAY, SUITE 700, DALLAS, TEXAS 75207, AND A COPY WILL BE
MADE AVAILABLE WITHOUT CHARGE TO THE REQUESTING STOCKHOLDER.
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APPENDIX I
HADSON CORPORATION 1992 EQUITY INCENTIVE PLAN
(as amended and restated as of March 9, 1994)
SECTION 1.
PURPOSE
The purposes of this Hadson Corporation 1992 Equity Incentive Plan
(this "Plan") are to attract and retain the best available employees and
directors of Hadson Corporation (the "Company") and any Parent or Subsidiary of
the Company (each as hereinafter defined), to provide additional incentive to
such persons and to promote the success of the business of the Company. This
Plan is intended to comply with Rule 16b-3 under Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision ("Rule 16b-3"), and this Plan shall be construed, interpreted and
administered to so comply.
SECTION 2.
OTHER DEFINITIONS
As used in this Plan:
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means the Compensation Committee or other committee
appointed by the Board, which shall consist of two or more directors, each of
whom shall be a "disinterested person" within the meaning of Rule 16b-3(c)
under the Exchange Act, or any successor provision.
"Common Stock" means the Common Stock, $.01 par value, of the Company.
"Effective Date" means December 16, 1992.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Fair Market Value" means, with respect to the Common Stock and at any
date, (i) the reported closing price of such stock on the New York Stock
Exchange or other established stock exchange or the NASDAQ National Market
System on such date, or if no sale of such stock shall have been made on such
an exchange or the NASDAQ National Market System on that date, on the preceding
date on which there was such a sale, (ii) if such stock is not then listed on
such an exchange or quoted on the NASDAQ National Market System, the average of
the closing bid and asked prices per share for such stock in the
over-the-counter market as quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") on such date, or (iii) if
such stock is not then listed on such an exchange or quoted on NASDAQ or the
NASDAQ National Market System, an amount determined in good faith by the
Committee in its sole discretion.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under this Plan which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Non-Employee Director" means a director of the Company who is not an
employee of the Company or any Parent or Subsidiary of the Company.
"Non-Qualified Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under this Plan which is not intended to
be an Incentive Stock Option.
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"Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
"Participant" means a person selected by the Committee to receive an
award under this Plan and Non-Employee Directors.
"Restricted Stock" means Common Stock awarded to a Participant subject
to restrictions pursuant to this Plan.
"Restricted Stock Grant" means an award of shares of Restricted Stock.
"Section 16 Participant" means a Participant subject to Section 16 of
the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
SECTION 3.
ADMINISTRATION
(a) Committee Authority; Delegation. This Plan shall be
administered by the Committee. Among other things, the Committee shall have
authority, subject to the terms of this Plan (including, without limitation,
the provisions governing participation in this Plan by Non-Employee Directors),
to grant awards under this Plan and to determine the individuals to whom and
the time or times at which awards may be granted, the type(s) of award(s) to be
granted to such individuals pursuant to this Plan and the terms and conditions
of such awards; provided, however, that the maximum number of shares which may
be subject to all Options and Restricted Stock Grants awarded to a Participant
during any calendar year may not exceed 500,000 (subject to adjustment pursuant
to Section 5(b) hereof). All administrative powers may be delegated by the
Committee, except where (i) such powers with respect to the selection of and
determination of awards for Section 16 Participants are required to be
exercised by the Committee in order to enable this Plan to qualify for the
exemption provided by Rule 16b-3 or (ii) such delegation would cause the
benefits under this Plan to "covered employees" within the meaning of Section
162(m) of the Code to not qualify as performance-based compensation within the
meaning of Section 162(m) of the Code and applicable interpretive authority
thereunder.
(b) Actions of Committee. Subject to the provisions of Section
10(e) hereof, the Committee shall have authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the operation of
this Plan as it shall from time to time consider advisable, to interpret the
provisions of this Plan and any Option Agreement or Restricted Stock Agreement
(each as hereinafter defined), and to decide all disputes arising in connection
with this Plan. The Committee's decisions and interpretations shall be final
and binding. Any action of the Committee with respect to the administration of
this Plan shall be taken pursuant to a majority vote or by the unanimous
written consent of its members.
(c) Indemnification. The Company shall indemnify and hold
harmless each director of the Company and each Committee member for any action
or determination made in good faith with respect to this Plan or any Option
Agreement or Restricted Stock Agreement.
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SECTION 4.
ELIGIBILITY
The following individuals shall be eligible to receive awards pursuant
to this Plan as follows:
(a) Any employee (including any officer or director who is an
employee) of the Company or any Parent or Subsidiary of the Company shall be
eligible to receive Incentive Stock Options under this Plan. Any employee
(including any officer or director who is an employee) of the Company or any
Parent, Subsidiary or other affiliate of the Company shall be eligible to
receive Non- Qualified Stock Options and Restricted Stock Grants under this
Plan. Eligible employees may receive more than one Option or Restricted Stock
Grant under this Plan.
(b) Any Non-Employee Director of the Company shall be eligible to
receive Options and Restricted Stock Grants only as set forth in Section 8
hereof.
SECTION 5.
STOCK AVAILABLE UNDER THIS PLAN
(a) Number of Shares Available. Subject to any adjustments made
pursuant to Section 5(b) hereof, the aggregate number of shares of Common Stock
that may be delivered pursuant to the exercise of all Options granted and
pursuant to all Restricted Stock Grants awarded under this Plan shall be
3,900,000, of which no more than 1,000,000 shares may be delivered pursuant to
Restricted Stock Grants and the exercise of Options awarded to Non-Employee
Directors in accordance with the provisions of Section 8 hereof. If any Option
expires or is terminated before exercise or if any portion of any Restricted
Stock Grant is forfeited for any reason, the shares of Common Stock which were
subject to but were either forfeited to the Company or not delivered under such
Option or Restricted Stock Grant, and any other shares of Common Stock that for
any other reason are not issued to a Participant, shall again be available for
award under this Plan as if no Option or Restricted Stock Grant had been
awarded with respect to such shares. Awards under this Plan may be fulfilled
with either authorized and unissued shares of Common Stock or issued and
reacquired shares of Common Stock.
(b) Adjustment. In the event of a stock dividend, stock split or
combination of shares of Common Stock, recapitalization or other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company, appropriate and proportionate
adjustment shall be made in (i) the number and kind of shares of stock in
respect of which Options or Restricted Stock Grants may be awarded under this
Plan, (ii) the number and kind of shares of stock or other property subject to
outstanding Options and Restricted Stock Grants and (iii) the award, exercise
or conversion price with respect to any of the foregoing. In the event that
the Committee determines in its sole discretion that any extraordinary cash
dividend, creation of a class of equity securities, recapitalization,
reclassification, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar
transaction, affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under this Plan to Participants other than Non-Employee Directors,
the Committee shall have the right to adjust equitably any or all of (i) the
number and kind of shares of stock in respect of which Options or Restricted
Stock Grants may be awarded under this Plan to Participants other than
Non-Employee Directors, (ii) the number and kind of shares of stock or other
property subject to outstanding Options and Restricted Stock Grants held by
Participants other than Non-Employee Directors and (iii) the award, exercise or
conversion price with respect to any of the foregoing held by Participants
other than Non-Employee Directors.
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<PAGE> 30
SECTION 6.
TERMS AND CONDITIONS OF OPTIONS
(a) Grants of Options. Subject to the provisions of this Plan,
the Committee may award Incentive Stock Options and Non-Qualified Stock Options
and determine the number of shares to be covered by each Option, the option
price therefor, the term of the Option, and the other conditions and
limitations applicable to the exercise of the Option. The terms and conditions
of Incentive Stock Options shall be subject to and comply with Section 422 of
the Code, or any successor provision, and any regulations thereunder. Anything
in this Plan to the contrary notwithstanding, no term of this Plan relating to
Incentive Stock Options shall be interpreted, amended or altered, nor shall any
discretion or authority granted to the Committee under this Plan be so
exercised, so as to disqualify this Plan or, without the consent of the
Participant, any Incentive Stock Option granted under this Plan, under Section
422 of the Code. Each grant of an Option may be made alone or in combination
with, in addition to or in relation to any other award authorized by this Plan.
The terms of each Option need not be identical, and the Committee need not
treat Participants uniformly. Except as otherwise provided by this Plan or a
particular Option Agreement, any determination with respect to an Option may
be made by the Committee at the time of award or at any time thereafter.
(b) Agreement in Writing; Provisions. Each Option under this Plan
shall be evidenced by a written agreement (each, an "Option Agreement")
delivered to the Participant specifying the terms and conditions thereof and
containing such other terms and conditions not inconsistent with the provisions
of this Plan as the Committee considers necessary or advisable to achieve the
purposes of this Plan or comply with applicable tax and regulatory laws and
accounting principles. Each Option Agreement shall specify whether the
Option(s) granted thereby are Incentive Stock Options or Non-Qualified Stock
Options. Each Option Agreement may incorporate all or any of the terms hereof
by reference and shall comply with and be subject to the following terms and
conditions:
(i) Shares Granted. Each Option Agreement shall specify
the number of Incentive Stock Options and/or Non- Qualified Stock
Options being granted; one Option shall be deemed granted for each
share of stock. In addition, each Option Agreement shall specify the
option price and the exercisability and/or vesting schedule of such
Options, if any.
(ii) Other Terms. Each Option Agreement may contain such
other terms, provisions and conditions not inconsistent with this Plan
as may be determined by the Committee, including, without limitation,
discretionary performance standards, tax withholding provisions, or
other forfeiture provisions regarding competition and confidential
information.
(c) Option Price. The option price per share of Common Stock
purchasable under an Option shall be 100% of the Fair Market Value of the
Common Stock on the date of award. If the Participant owns or is deemed to own
(by reason of the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of the
Company or any Subsidiary or Parent of the Company and an Incentive Stock
Option is granted to such Participant, the option price shall be 110% of Fair
Market Value of the Common Stock on the date of award.
(d) Method of Payment. The purchase price for any share purchased
pursuant to the exercise of any Option granted under this Plan shall be paid in
full upon exercise of the Option by any of the following methods, to the extent
permitted under the particular Option Agreement: (i) by cash, (ii) by check or
(iii) by transferring to the Company shares of Common Stock at their Fair
Market Value as of the date of exercise of the Option. Notwithstanding the
foregoing, the Company may arrange for or cooperate in permitting cashless
exercise procedures and may extend and maintain, or arrange for the extension
and maintenance of, credit to a Participant to finance the Participant's
purchase of shares pursuant to the exercise of Options, on such terms as may be
approved by the Committee, subject to applicable regulations of the Federal
Reserve Board and any other applicable laws or regulations in effect at the
time such credit is extended.
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<PAGE> 31
(e) Termination. No Option shall be exercisable more than ten
years after the date the Option is awarded. If a Participant owns or is deemed
to own (by reason of the attribution rules of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or Parent of the Company and an Incentive Stock
Option is awarded to such Participant, such Option shall not be exercisable
after the expiration of five years from the date of award.
(f) Exercise. No Option shall be exercisable during the lifetime
of a Participant by any person other than the Participant or his or her
guardian or legal representative. The Committee shall have the power to set
the time or times within which each Option shall be exercisable and to
accelerate the time or times of exercise of each Option, other than, in each
case, Options awarded or to be awarded to Non-Employee Directors. To the
extent that a Participant has the right to exercise one or more Options and
purchase shares pursuant thereto, the Option(s) may be exercised from time to
time by written notice to the Company stating the number of shares being
purchased and accompanied by payment in full of the option price for such
shares. Any certificate for shares of outstanding Common Stock used to pay the
option price shall be accompanied by a stock power duly endorsed in blank by
the registered owner of the certificate (with the signature thereon
guaranteed). In the event the certificate tendered by the Participant in such
payment covers more shares than are required for such payment, the certificate
shall also be accompanied by instructions from the Participant to the Company's
transfer agent with respect to the disposition of the balance of the shares
covered thereby.
(g) Disability, Death, Retirement or Other Termination. The
Committee shall determine the effect on an Option (other than an Option awarded
or to be awarded to a Non-Employee Director) of the disability, death,
retirement or other termination of employment of a Participant and the extent
to which, and the period during which, the Participant's legal representative,
guardian or designated beneficiary may exercise rights thereunder.
(h) No Deemed Termination. For purposes of this Section 6, the
following events shall not be deemed a termination of employment of a
Participant:
(i) a transfer to the employment of the Company from a
Subsidiary of the Company or from the Company to a Subsidiary of the
Company, or from one Subsidiary of the Company to another; or
(ii) an approved leave of absence for military service or
sickness, or for any other purpose approved by the Company, if the
Participant's right to reemployment is guaranteed either by a statute
or by contract or under the policy pursuant to which the leave of
absence was granted or if the Committee otherwise so provides in
writing.
For purposes of this Plan, employees of a Subsidiary of the Company shall be
deemed to have terminated their employment on the date on which such Subsidiary
ceases to be a Subsidiary of the Company.
(i) Nontransferability. No Option or interest therein or right
thereunder shall be transferable by a Participant otherwise than by will or the
laws of descent and distribution.
(j) Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of an Option. The value of any fractional
share subject to an Option shall be paid in cash in connection with the
exercise that results in all full shares subject to the grant having been
exercised, based on the Fair Market Value of the Common Stock on the date of
such exercise.
(k) $100,000 Limit for Incentive Stock Options. If required by
applicable tax rules regarding a particular grant, to the extent that the
aggregate Fair Market Value (determined as of the date an Incentive Stock
Option is granted) of the shares with respect to which an Incentive Stock
Option grant under this Plan (when aggregated, if appropriate, with shares
subject to other Incentive Stock Option grants made before said grant under
this Plan or any other plan maintained by the Company or any Parent or
Subsidiary of the
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<PAGE> 32
Company) is exercisable for the first time by a Participant during any
calendar year exceeds $100,000 (or such other limit as is prescribed by the
Code), such Option grant shall be treated as a grant of Non-Qualified Stock
Options pursuant to Code Section 422(d).
(l) Disposition of Incentive Stock Options. A Participant shall
notify the Committee in the event that he or she disposes of Common Stock
acquired upon exercise of an Incentive Stock Option within the two-year period
following the date the Incentive Stock Option was granted or within the
one-year period following the date he or she received Common Stock upon the
exercise of an Incentive Stock Option.
(m) Option Modification. The Committee may amend, modify or
terminate any outstanding Option held by a Participant other than a
Non-Employee Director, including substituting therefor another Option of the
same or a different type, changing the date of exercise or vesting and
converting an Incentive Stock Option to a Non-Qualified Stock Option, provided
that the Participant's consent to such action shall be required unless the
Committee determines in its sole discretion that the action, taking into
account any related action, would not materially and adversely affect the
Participant (subject to Section 6(a) hereof or unless such change is required
in order to cause the benefits under this Plan to qualify as performance-based
compensation within the meaning of Section 162(m) of the Code and applicable
interpretive authority thereunder).
SECTION 7.
TERMS AND CONDITIONS OF RESTRICTED STOCK GRANTS
(a) Restricted Stock Grants. Subject to the provisions of this
Plan, the Committee may award Restricted Stock Grants and determine the number
of shares of Restricted Stock covered by such Grant, the restrictions thereon
(which may include, without limitation, restrictions on the transfer of such
shares, restrictions on the right to vote such shares and restrictions on the
right to receive dividends on such shares), the time or times at which and the
conditions upon which such restrictions shall lapse, and the other terms and
conditions applicable to such Grant. Each Restricted Stock Grant may be made
alone or in combination with, in addition to or in relation to any other award
authorized by this Plan. The terms of each Restricted Stock Grant need not be
identical, and the Committee need not treat Participants uniformly. Except as
otherwise provided by this Plan or a particular Restricted Stock Agreement, any
determination with respect to a Restricted Stock Grant may be made by the
Committee at the time of award or at any time thereafter. The Committee may,
but shall not be required to, award Restricted Stock Grants based upon the
attainment of one or more "performance goals" within the meaning of Section
162(m) of the Code and applicable interpretive authority thereunder.
(b) Agreement in Writing; Provisions. Each Restricted Stock Grant
shall be evidenced by a written agreement (each, a "Restricted Stock
Agreement") delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with
the provisions of this Plan as the Committee considers necessary or advisable
to achieve the purposes of this Plan or comply with applicable tax and
regulatory laws and accounting principles. Each Restricted Stock Agreement may
incorporate all or any of the terms hereof by reference and shall comply with
and be subject to the following terms and conditions:
(i) Shares Awarded. Each Restricted Stock Agreement
shall specify the number of shares of Restricted Stock being awarded
pursuant to the applicable Grant and the schedule for the lapse of the
restrictions on the shares subject to such Restricted Stock Grant.
(ii) Other Terms. Each Restricted Stock Agreement may
contain such other terms, provisions and conditions not inconsistent
with this Plan as may be determined by the Committee, including,
without limitation, discretionary performance standards, tax
withholding provisions, or other forfeiture provisions regarding
competition and confidential information.
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<PAGE> 33
(c) Delivery of Shares. Each share of Restricted Stock, when
issued, shall be issued in the name of the Participant and the certificate
evidencing such share shall be deposited with the Company, together with a
stock power duly endorsed in blank, upon such issuance and continuing until all
applicable restrictions on such share shall have lapsed.
(d) Disability, Death, Retirement or Other Termination. The
Committee shall determine the effect on a Restricted Stock Grant (other than a
Restricted Stock Grant awarded or to be awarded to a Non-Employee Director) of
the disability, death, retirement or other termination of employment of a
Participant. For purposes of this Section 7, (i) the events described in
Section 6(h) shall not be deemed a termination of employment of a Participant
and (ii) employees of a Subsidiary of the Company shall be deemed to have
terminated their employment on the date on which such Subsidiary ceases to be a
Subsidiary of the Company.
(e) Nontransferability. Prior to the lapse of all restrictions
thereon, no share of Restricted Stock or interest therein or right thereunder
shall be transferable by a Participant otherwise than by will or the laws of
descent and distribution.
(f) Restricted Stock Grant Modification. The Committee may amend,
modify or terminate any outstanding Restricted Stock Grant held by a
Participant other than a Non-Employee Director, including substituting therefor
another Restricted Stock Grant of the same or a different type and changing the
time or times at which any restrictions shall lapse, provided that the
Participant's consent to such action shall be required unless the Committee
determines in its sole discretion that the action, taking into account any
related action, would not materially and adversely affect the Participant
(unless such change is required in order to cause the benefits under this Plan
to qualify as performance-based compensation within the meaning of Section
162(m) of the Code and applicable interpretive authority thereunder).
SECTION 8.
NONDISCRETIONARY AWARDS
TO NON-EMPLOYEE DIRECTORS
Notwithstanding any other provision of this Plan, Non-Employee
Directors shall participate in this Plan only to the extent set forth in this
Section 8. The provisions of this Plan applicable to awards granted or to be
granted to Non-Employee Directors are intended to comply with the provisions of
Rule 16b-3(c)(2)(ii) under the Exchange Act, or any successor provision, and
such provisions shall be construed, interpreted and administered to so comply.
The Committee shall have no authority to take any action, and shall not take
any action, if the authority to take such action, or the taking of such action,
would result in noncompliance with such provisions.
(a) Automatic Grant of Options.
(i) Date of Grant; Number of Shares. On the date upon
which a Non-Employee Director is first elected or appointed a member of the
Board, he or she shall receive the grant of a Non-Qualified Stock Option to
purchase 6,667 shares of Common Stock. For the purpose of this Section 8(a),
each Non-Employee Director in office on the Effective Date shall be deemed to
have been first elected at such date. Non-Employee Directors subsequently
re-elected at any meeting of stockholders shall receive as of the date of each
such meeting, commencing with the annual meeting of stockholders to be held in
1994, the grant of a Non- Qualified Stock Option to purchase 666 shares of
Common Stock. Options granted to Non-Employee Directors shall be immediately
exercisable.
(ii) Term. The term of each Option granted to a
Non-Employee Director shall be ten years from its date of grant, unless sooner
terminated or extended in accordance with Section 8(e) below.
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<PAGE> 34
(iii) Option Price. The option price of the shares of
Common Stock subject to each Option granted to a Non- Employee Director shall
be the Fair Market Value of such shares on the date the Option is granted.
(iv) Exercise after Death or Other Termination. If a
Non-Employee Director ceases to be a director of the Company, such Non-Employee
Director's Options shall be exercisable by him only during the 36 months
following the date such person ceases to be a director, except that:
(A) if a Non-Employee Director dies while serving
as a director, such Non-Employee Director's Options shall be
exercisable by his or her executor or administrator or, if not so
exercised, by the legatees or the distributees of his or her estate,
only during the 36 months following his or her death; and
(B) notwithstanding the foregoing, a Non-Employee
Director's Options shall terminate immediately on the date that such
person is removed as a director for cause. For purposes of this
Section 8, a Non-Employee Director shall be considered to have been
dismissed "for cause" in the event he or she is dismissed on account
of any act of (x) fraud or intentional misrepresentation or (y)
embezzlement, misappropriation, or conversion of assets or
opportunities of the Company or any Subsidiary of the Company.
(b) Automatic Award of Restricted Stock Grants.
(i) Date of Award; Number of Shares. Beginning on the
date of the annual meeting of stockholders of the Company to be held in 1994
and on the date of each annual meeting of stockholders thereafter, each
Non-Employee Director shall receive 50% of the value of his or her annual
retainer fee for serving as a director of the Company for the year commencing
on such date in the form of an award of a Restricted Stock Grant. The total
number of shares of Common Stock included in each such Restricted Stock Grant
shall be determined by dividing the amount of the director's annual retainer
fee that is to be paid in the form of a Restricted Stock Grant by the Fair
Market Value of one share of Common Stock on the date of award. In no event
shall the Company be required to issue fractional shares under this Section
8(b). Whenever under the terms of this Section 8(b) a fractional share of
Common Stock would otherwise be required to be issued, an amount in cash shall
be paid in lieu thereof based on the Fair Market Value of the Common Stock on
the applicable award date.
(ii) Restrictions. Except as otherwise provided in this
Plan, shares of Common Stock received pursuant to a Restricted Stock Grant may
not be sold, assigned, pledged, hypothecated or otherwise disposed of until at
least six months and one day after the date of award of such Restricted Stock
Grant (the "Restriction Lapse Date"). Except as set forth in the preceding
sentence, with respect to all shares subject to a Restricted Stock Grant, a
Non-Employee Director shall have all voting, dividend, liquidation and other
rights of a holder of Common Stock.
(iii) Forfeiture. If a Non-Employee Director is removed as
a director of the Company for cause (as defined in Section 8(a) hereof) prior
to the Restriction Lapse Date applicable to a Restricted Stock Grant, such
person shall forfeit all shares subject to such Restricted Stock Grant.
(c) Adjustments. The number and nature of shares subject to any
Option or Restricted Stock Grant held by a Non- Employee Director shall be
subject to adjustment only to the extent set forth in the first sentence of
Section 5(b) hereof.
(d) Agreement in Writing. Each Option and each Restricted Stock
Grant awarded to a Non-Employee Director shall be evidenced by a writing signed
by him or her specifying the terms and conditions thereof in accordance with
this Section 8.
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<PAGE> 35
SECTION 9.
ACCELERATION OF EXERCISABILITY AND
VESTING UNDER CERTAIN CIRCUMSTANCES
(a) Change of Control. In order to preserve the rights of a
Participant (other than a Non-Employee Director) under an Option or Restricted
Stock Grant in the event of a change of control of the Company, the Committee
in its discretion may, with respect to any Option or Restricted Stock Grant
(other than an Option or Restricted Stock Grant awarded to a Non-Employee
Director), at the time the Option or Restricted Stock Grant is awarded or at
any time thereafter, take one or more of the following actions with respect to
any such change of control: (i) provide for the acceleration of any time period
relating to the exercise or vesting of the Option or the lapse of any
restrictions on shares of Restricted Stock; (ii) provide for the purchase of
the Option upon the Participant's request for an amount of cash or other
property that could have been received upon the exercise of the Option had the
Option been currently exercisable; (iii) adjust the terms of the Option or
Restricted Stock Grant in such manner as may be determined by the Committee;
(iv) cause the Option or Restricted Stock Grant to be assumed, or new rights
substituted therefor, by another entity; or (v) make such other provision as
the Committee may consider equitable and in the best interests of the Company.
(b) Certain Other Occurrences. Notwithstanding any provision in
this Plan to the contrary, with regard to any Option or Restricted Stock Grant
awarded to any executive officer or director of the Company, unless the
particular Option or Restricted Stock Agreement provides otherwise, the Option
will become immediately exercisable and vested in full, and all restrictions on
any shares of Restricted Stock subject to a Restricted Stock Grant shall
immediately lapse, upon the occurrence, before the expiration or termination of
such Option or forfeiture of such shares, of any of the events listed below:
(i) the delivery of written notice to the stockholders of
the Company announcing a stockholders' meeting at which the
stockholders will consider a proposed merger of the Company, a
proposed sale by the Company of substantially all of its assets or any
similar proposed reorganization of the Company; or
(ii) the acquisition of beneficial ownership (as such term
is defined in Rule 13d-3 promulgated under the Exchange Act) by any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than (A) the Company or (B) The Prudential
Insurance Company of America and its affiliates, directly or
indirectly, of securities representing 25% or more of the total number
of votes that may be cast for the election of directors of the
Company; or
(iii) the commencement (within the meaning of Rule 14d-2
promulgated under the Exchange Act) of a "tender offer" for stock of
the Company subject to Section 14(d)(2) of the Exchange Act; or
(iv) the failure, at any annual or special meeting of the
Company's stockholders following an "election contest" subject to Rule
14a-11 promulgated under the Exchange Act, of any of the persons
nominated by the Company in the proxy material mailed to stockholders
by the management of the Company to win election to seats on the
Board, excluding only those who die, retire voluntarily, are disabled
or are otherwise disqualified in the interim between their nomination
and the date of the meeting.
SECTION 10.
MISCELLANEOUS
(a) No Right of Employment. No person shall have any claim or
right to be awarded an Option or Restricted Stock Grant, and the award of an
Option or Restricted Stock Grant shall not be construed as giving a Participant
the right to continued employment. The Company expressly reserves the right at
any time
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<PAGE> 36
to dismiss a Participant free from any liability or claim under this
Plan, except as expressly provided in the applicable Option or Restricted Stock
Agreement.
(b) Plan Not Exclusive. Nothing contained in this Plan shall
prevent the Company from adopting other or additional compensation arrangements
for its employees or directors.
(c) No Rights as Stockholders. Subject to the provisions of the
applicable Option or Restricted Stock Agreement, no Participant shall have any
rights as a stockholder with respect to any shares of Common Stock to be
distributed under this Plan until he or she becomes the record holder thereof.
(d) Investment Representation. The Committee may require, as a
condition of receiving shares of Common Stock (including shares of Restricted
Stock) issued pursuant to any Option or Restricted Stock Grant, that a
Participant furnish to the Company such written representations and information
as the Committee deems appropriate to permit the Company, in light of the
existence or nonexistence of an effective Registration Statement under the
Securities Act, to deliver such shares in compliance with the provisions of the
Securities Act.
(e) Section 16 Participants. Notwithstanding any other provision
of this Plan, in order to qualify for the exemption provided by Rule 16b-3, (i)
any shares of Restricted Stock or other equity security received by a Section
16 Participant pursuant to a Restricted Stock Grant and any Common Stock or
other equity security acquired by a Section 16 Participant upon exercise of an
Option may not be sold for six months and one day after the date of award of
the Restricted Stock Grant or Option and (ii) any Option or other right related
to an equity security issued under this Plan that constitutes a "derivative
security" within the meaning of Rule 16b-3(a)(2) under the Exchange Act, or any
successor provision, shall not be transferable other than by will or the laws
of descent and distribution. The Committee shall have no authority to take any
action, and shall not take any action, if the authority to take such action, or
the taking of such action, would disqualify this Plan from the exemption
provided by Rule 16b-3.
(f) Effectiveness. This Plan amendment and restatement shall
become effective upon its approval by the Board, subject to approval by the
stockholders of the Company. Prior to such stockholder approval, awards may be
granted under this Plan amendment and restatement subject to such stockholder
approval.
(g) Amendment; Termination. The Board may amend, suspend or
terminate this Plan or any portion thereof at any time, provided that (i) no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement,
including any requirements for exemptive relief under Section 16(b) of the
Exchange Act or any successor provision, and (ii) Section 8 hereof and, as it
relates to awards granted or to be granted to Non-Employee Directors, Section
9(b) hereof may not be amended more than once every six months other than to
comport with changes in the Code or ERISA or the rules and regulations under
either thereof. If any amendment, suspension or termination of this Plan shall
materially and adversely affect the rights of the holder of any award then
outstanding, such amendment, suspension or termination shall not be deemed to
alter such rights unless the holder shall consent thereto.
(h) Term. Options and Restricted Stock Grants may not be awarded
under this Plan after ten years from the Effective Date, but then outstanding
Options and Restricted Stock Grants may extend beyond such date. Unless sooner
terminated, this Plan shall terminate on the tenth anniversary of the Effective
Date, provided that such termination shall not terminate or affect any Option
or Restricted Stock Grant then outstanding.
10
<PAGE> 37
(Proxy Card) PRELIMINARY COPY
(Front)
HADSON CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Greg G. Jenkins, Robert P. Capps and Terri
McGuire Watson, and each of them, jointly and severally and with full power of
substitution, as true and lawful agents, attorneys and proxies to vote all
shares of Common Stock of Hadson Corporation (the "Company") that the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held on Thursday, May 26, 1994, and at any and all postponements and
adjournments thereof as follows:
1. ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY
listed below to vote for all
(except as marked nominees
to the contrary listed below / /
below) / /
MICHAEL J. ROSINSKI J. FRANK HAASBEEK JAMES A. BITZER
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THAT NOMINEE'S NAME.
UNLESS AUTHORITY TO VOTE FOR ALL THE FOREGOING NOMINEES IS WITHHELD, THIS PROXY
SHALL BE DEEMED TO CONFER AUTHORITY TO VOTE FOR EVERY NOMINEE WHOSE NAME IS NOT
STRUCK.
2. PROPOSAL TO APPROVE MARCH 9, 1994 AMENDMENT AND RESTATEMENT OF THE
HADSON CORPORATION 1992 EQUITY INCENTIVE PLAN, AS AMENDED, described in the
Company's Proxy Statement dated April ___, 1994. IF NO DIRECTION IS GIVEN,
THIS PROXY SHALL BE DEEMED TO CONFER AUTHORITY TO VOTE FOR THIS PROPOSAL.
FOR / / AGAINST / / ABSTAIN / /
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION described in the Company's Proxy
Statement dated April ___, 1994. IF NO DIRECTION IS GIVEN, THIS PROXY
SHALL BE DEEMED TO CONFER AUTHORITY TO VOTE FOR THIS PROPOSAL.
FOR / / AGAINST / / ABSTAIN / /
<PAGE> 38
(Back)
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED AS DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF ANY OTHER BUSINESS IS TRANSACTED AT
THE ANNUAL MEETING, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE JUDGMENT
OF THE PERSON OR PERSONS VOTING THE PROXY.
Date_____________________________________, 1994
______________________________________________
SIGNATURE
______________________________________________
SIGNATURE (IF HELD JOINTLY)
Please sign exactly as name appears herein. If
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If signing on behalf of a corporation,
please sign in full corporate name by an
authorized officer. If shares are registered
in more than one name, all holders must sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
