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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ........... to .............
COMMISSION FILE NUMBER 1-9891
HADSON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0679954
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2777 STEMMONS FREEWAY, SUITE 700, DALLAS, TEXAS 75207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 640-6800
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
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Common Stock, $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Junior Exercisable Automatically Convertible
Preferred Stock, Series B, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X NO
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Aggregate market value of the voting stock held by non-affiliates of
the registrant based on closing prices as reported on the New York Stock
Exchange on March 10, 1995 was approximately: $20,344,514
25,710,483 shares of Common Stock, par value $.01 per share, were
outstanding as of March 10, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference.
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TABLE OF CONTENTS
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PART I
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Information about Industry Segments . . . . . . . . . . . . . . . . . . . . . . . . 3
Energy Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Operations of Unconsolidated Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Number of Persons Employed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Natural Gas Gathering Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Transmission Facilities and Related Property . . . . . . . . . . . . . . . . . . . . . . . . . 13
Natural Gas Liquids Facilities and Related Property . . . . . . . . . . . . . . . . . . . . . 13
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Fixed Price Contract Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Personal Injury Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Joint Venture Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Class Action Complaint.......................................................................... 14
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . 15
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . 24
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Compliance with Section 16(a) of the Exchange Act . . . . . . . . . . . . . . . . . . . . . . 26
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Option Grants Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Options Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . 29
Security Ownership of Certain Beneficial Owners. . . . . . . . . . . . . . . . . . . . . . . . 29
Security Ownership of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Change in Control of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 31
Gas Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Indemnification and Directors' and Officers' Insurance . . . . . . . . . . . . . . . . . . . 33
Company Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Parent Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Agreement with Elliot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
PART IV
Item 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS, FINANCIAL
STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . 35
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PART I
ITEM 1. BUSINESS
GENERAL
Hadson Corporation, a Delaware corporation (the "Company"), is
engaged, through its consolidated subsidiaries, in the purchasing, marketing,
gathering, processing, storing and transporting of natural gas and natural gas
liquids ("NGLs"), as well as the marketing of related services.
The Company was incorporated in Ohio in 1964 as Hadson Ohio Oil
Company. In 1980, it effected a change of domicile to the state of Delaware,
and in 1986 its name was changed to Hadson Corporation. The Company's
corporate headquarters are located at 2777 Stemmons Freeway, Suite 700, Dallas,
Texas 75207, and the Company's telephone number is (214) 640-6800.
RECENT DEVELOPMENTS
Purchase of Joint Venture Interests
Pursuant to Purchase and Sale Agreements, dated as of December 9,
1994, the Company, through subsidiaries, purchased Merchant Gas Partners'
interest in four joint ventures for $3,450,000 in cash. As a result of this
transaction, the Company, through its subsidiaries, now owns 100% of a 74-mile
natural gas transmission system located in Texas plus other minor facilities.
Sale of Interest in Processing Plant
The Company, through a subsidiary, entered into an Agreement for
Purchase and Sale, dated as of December 17, 1993, with Parker & Parsley
Gathering & Processing Co. ("Parker & Parsley") whereby the Company assigned a
30% interest in a processing plant and related facilities located in Texas to
Parker & Parsley. In exchange for the interest in the plant and related
facilities, the Company received (i) $2,500,000 in cash; (ii) ownership of a
gathering system located in New Mexico, along with production dedicated to that
system; and (iii) dedication of additional production to the plant and related
facilities. The transaction closed in February 1994, but was effective as of
December 31, 1993.
Sale of Interest in Midwest Energy Companies, Inc.
The Company entered into a Stock Purchase Agreement, dated as of
December 30, 1993, with Midwest Energy Companies, Inc. ("Midwest") whereby
Midwest purchased the Company's 17% equity interest in Midwest. Midwest
executed a promissory note in favor of the Company in the principal amount of
$325,000 in exchange for the Company's 10,235,885 shares of common stock of
Midwest.
Merger of Adobe Gas Pipeline Company with and into the Company
On December 14, 1993, the stockholders of the Company approved and
adopted an Agreement of Merger, dated July 28, 1993, as amended (the "Adobe
Merger Agreement"), among the Company, Santa Fe Energy Resources, Inc. ("Santa
Fe") and Adobe Gas Pipeline Company ("AGPC"), then an indirect, wholly-owned
subsidiary of Santa Fe. Pursuant to the Adobe Merger Agreement, AGPC was
merged (the "Adobe Merger") with and into the Company (which was the surviving
corporation in the Adobe Merger). In addition to effecting the acquisition by
the Company of AGPC, the Adobe Merger also effected a restructuring of the
Company's debt and equity capitalization (including an approximate one-for-15
reverse split of the Company's Common Stock).
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Financial Reorganization
In December 1992, the Company completed a restructuring of its
long-term debt through a "pre-packaged" bankruptcy proceeding (the "1992
Restructuring"). On October 15, 1992, the Company filed its Chapter 11
bankruptcy petition as well as its plan of reorganization (the "Plan") in the
Western District of Oklahoma. The bankruptcy court confirmed the Plan on
November 30, 1992, and the Plan was consummated on December 16, 1992. Pursuant
to the Plan, approximately $131,900,000 of long-term debt with the related
accrued interest and certain other obligations were converted into $56,400,000
of 6.20% Senior Secured Notes due 2000 and into shares of 7% Senior Cumulative
Preferred Stock, Series A, par value $.01 per share, 8% Junior Cumulative
Convertible Preferred Stock, Series B, par value $.01 per share, Class B and
Class C Common Stock and Common Stock, all of which were in existence prior to
the Adobe Merger and which were subsequently restructured through the Adobe
Merger.
SUBSEQUENT EVENTS
Sale of United LP Gas Corporation
The Company entered into a Stock Purchase Agreement, dated as of
December 21, 1994, by and among the Company, United LP Gas Corporation
("United") and United Acquisition Corp. ("United Acquisition") whereby the
Company sold all of the 500 issued and outstanding shares of United to United
Acquisition in exchange for the purchase price of $3,100,000, plus the excess
of United's current assets over its current liabilities as of December 31,
1994. The aggregate purchase price paid by United Acquisition at the closing
consisted of (i) cash of $1,200,000, plus the value of United's inventory,
which was approximately $1,900,000; (ii) a subordinated promissory note issued
in favor of the Company in the amount of $1,000,000 (the "Note"); and (iii)
90,000 shares of United's Series A Redeemable Preferred Stock, par value $10.00
per share. The Note is secured by a first lien on all assets of United not
otherwise encumbered and by a second lien on all other assets of United. In
addition to the purchase price received at the closing of the sale, the Company
is to receive an amount equal to the excess of United's current assets, other
than inventory, over current liabilities as such amounts are realized by
United, which amount is expected to be approximately $1,500,000. The sale of
United was completed on January 31, 1995 and effective as of January 1, 1995.
Acquisition of the Company by LG&E Energy Corp.
On February 10, 1995, the Company, LG&E Energy Corp., a Kentucky
corporation ("Parent"), and Carousel Acquisition Corporation ("Merger Sub"), a
Delaware corporation and an indirect wholly-owned subsidiary of Parent, entered
into an Agreement and Plan of Merger (the "Merger Agreement") which sets forth
the terms of a proposed merger of Merger Sub with and into the Company (the
"Merger"). The Merger will be consummated on the terms and subject to the
conditions set forth in the Merger Agreement, as a result of which (a) the
Company will become a subsidiary of Parent and will be wholly-owned with the
exception of the outstanding shares of Junior Exercisable Automatically
Convertible Preferred Stock, Series B, par value $.01 per share, of the Company
("Series B Preferred") not owned by Parent subsequent to the Merger and (b)
each share of Common Stock, par value $.01 per share, of the Company ("Company
Common Stock") then outstanding (other than shares of Company Common Stock (i)
held in the Company's treasury, (ii) held by any holder who shall have properly
exercised, and not withdrawn or lost, appraisal rights under the Delaware
General Corporation Law (the "DGCL") and (iii) beneficially owned by Parent or
its subsidiaries, including, without limitation, shares of Company Common Stock
held in the H/P Trust, described below) will be converted into the right to
receive $2.75 in cash, without any interest thereon.
Each share of Senior Cumulative Preferred Stock, Series A, par value
$.01 per share, of the Company ("Series A Preferred") and each share of Series
B Preferred issued and outstanding immediately prior to the effective time (the
"Effective Time") of the Merger shall remain unchanged and outstanding and
shall represent one share of Series A Preferred or Series B Preferred, as the
case may be, of the Company, which will be the surviving corporation in the
Merger. In accordance with its existing terms, on December 14, 1995, each
share of Series B Preferred will be converted automatically into the right to
receive $0.00275 in cash, without any interest thereon, based upon the existing
conversion rate of one-one thousandth of a share of Company Common Stock for
each share of Series B Preferred and the amount payable per share of Company
Common Stock as a result of the Merger.
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Concurrently with the execution and delivery of the Merger Agreement,
Parent and Merger Sub entered into Securities Purchase Agreements (the
"Securities Purchase Agreements") with The Prudential Insurance Company of
America ("Prudential Insurance"), Pruco Life Insurance Company ("Pruco") and
PruSupply, Inc. (collectively, "Prudential") and Santa Fe. Pursuant to the
Securities Purchase Agreement with Prudential, as amended (the "Prudential
Securities Purchase Agreement"), and subject to the terms and conditions set
forth therein, immediately prior to the Effective Time, Parent and Merger Sub
will acquire from Prudential Insurance and Pruco the following securities
(collectively, the "Prudential Securities"): (i) 1,329,771 shares of Company
Common Stock, (ii) beneficial ownership pursuant to the H/P Trust (which was
established by the Company in connection with the Adobe Merger) of 4,983,180
shares of Company Common Stock, (iii) 5,010 shares of Series B Preferred and
(iv) $52,900,000 aggregate principal amount of 8% Senior Secured Notes due 2003
(the "8% Senior Secured Notes"). The purchase price for the Prudential
Securities is $63,000,000 plus accrued interest, if any, on the 8% Senior
Secured Notes from the last interest payment date on which interest was paid in
full to, but not including, the day on which the closing of the purchase of the
Prudential Securities occurs. Pursuant to the Securities Purchase Agreement
with Santa Fe (the "Santa Fe Securities Purchase Agreement") and subject to the
terms and conditions set forth therein, immediately prior to the Effective
Time, Parent and Merger Sub will acquire from Santa Fe the following securities
(collectively, the "Santa Fe Securities"): (i) 10,395,665 shares of Company
Common Stock, (ii) 2,335,907 shares of Series A Preferred, and (iii) $2,350,000
in aggregate principal amount of 9% Junior Notes (the "9% Junior Notes") of the
Company. The purchase price for the Santa Fe Securities is $55,250,000.
The Merger Agreement and the Merger have each been approved by the
Board of Directors of the Company and the special committee (the "Special
Committee") of the Board of Directors formed to consider proposals received by
the Company. Under Delaware law, the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is required to
approve the Merger. Prudential and Santa Fe in the aggregate own 16,708,616
shares of Company Common Stock (excluding shares of the Company Common Stock
for which Prudential has the right to acquire upon exercise of the Series B
Preferred) representing approximately 65% of the Company Common Stock
outstanding on March 24, 1995. Prudential and Santa Fe have agreed to vote all
shares of Company Common Stock owned by them in favor of the Merger Agreement
and the Merger and have each granted Parent a proxy to vote such shares in
favor of the Merger and the Merger Agreement should either of them fail or
refuse to vote such shares in favor of such proposal. Prudential and Santa Fe
collectively own a sufficient number of shares of Company Common Stock to
approve and adopt the Merger Agreement and the Merger without the vote of any
other stockholder.
Under applicable federal securities laws, the Merger cannot be
effected until at least twenty calendar days after an Information Statement has
been sent or given to the Company's stockholders. Accordingly, the Company
expects that the Merger will be consummated during the second quarter of 1995,
assuming that the conditions to the Merger set forth in the Merger Agreement
have been satisfied.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
For financial information about industry segments, see Note 1 of the
Notes to Consolidated Financial Statements appearing elsewhere herein.
ENERGY PRODUCTS AND SERVICES
General
The Company's energy products and services business is concentrated
primarily in three areas: (1) natural gas marketing operations and related
energy services, (2) natural gas facilities operations, which include
gathering, transportation, processing, treatment and storage operations, and
(3) through 1994, natural gas liquids transportation and marketing operations.
For the year ended December 31, 1994, these activities accounted for 100% of
the consolidated revenues of the Company. Such activities are conducted
through the primary operating subsidiaries of the Company which are Hadson Gas
Systems, Inc. ("Gas Systems"), Llano, Inc. ("Llano"), Hadson Gas Gathering &
Processing Co. (formerly known as Minerals, Inc.), United, Western Natural
Gas and Transmission Corporation ("Western"), Hadson Gas Co., Hadson Gas
Marketing Co., Hadson Gas Transmission Co., and Hadson Industrial Sales
Corporation. On September 30, 1994, Hadson Gas Gathering & Processing Co.,
a direct
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subsidiary of the Company, was merged with and into Minerals, Inc.
("Minerals"), a direct subsidiary of the Company, with Minerals being the
surviving corporation. Concurrently, the name of Minerals was changed to Hadson
Gas Gathering & Processing Co. ("HGG&P").
The energy products and services business is seasonal and affected by
weather patterns in the market areas served by the Company. West Coast,
Southwest and Southeast markets typically have higher demand for the Company's
products in the summer months, while the Northeast and Midwest market demand is
generally greater in the winter.
Natural Gas Marketing Operations
The majority of the Company's natural gas marketing operations are
conducted through Gas Systems and Western. As part of the services it offers
customers, the Company aggregates supplies of natural gas from gas producers
and processors, uses its knowledge of federal, state and local regulations and
the natural gas industry to contract for transportation services, arranges for
transportation of gas over the most expeditious and economical pipeline routes
and assists its customers in complying with regulatory filings and other
matters relating to the requirements of the Federal Energy Regulatory
Commission (the "FERC"). The Company believes that the growth of its gas
marketing business depends primarily upon its ability to provide quality
services in response to evolving customer needs and market conditions.
The volume of gas transported and marketed by the Company has
increased from an average of approximately 83,000 million British thermal units
("MMBtu") per day in 1985 to average daily volumes of approximately 920,000
MMBtu in 1994. As of December 31, 1994, the Company had approximately 745
direct gas sales contracts with industrial firms, local gas distribution
companies, electric utilities, large commercial entities and institutions such
as hospitals, military bases and universities. The Company maintains a diverse
customer base in order to limit its reliance on any one industry or region.
During 1994, no customer accounted for 10% or more of the Company's total gas
sales. The Company competes with other gas marketers primarily on the basis of
market-responsive pricing, reliability of performance and customer service.
In connection with its gas marketing operations, the Company purchases
and takes title to gas at the wellhead, processing plants or other points of
delivery primarily from independent producers and major integrated oil
companies and sells such gas to industrial and institutional users, local gas
distribution companies and electric utilities across the United States. It is
the Company's general practice to contract for a diverse supply of gas from
various geographic locations and producers to minimize its reliance on any
single source or region and to maximize its ability to deliver gas to its
customers by the most advantageous route. The Company believes that it has
retained and increased its sources of supply because of its demonstrated
ability to market and transport the quantities of gas purchased. When
interruptible transportation is used, the Company, through its subsidiaries,
generally arranges for the transportation of gas from the point of purchase to
the customer's delivery point. If firm transportation is used, generally this
transportation is contracted for by the customer, although the Company, through
its subsidiaries, has executed a limited number of firm transportation
agreements.
The Company, through its subsidiaries, purchases and sells gas under
long-term contracts, as well as in the "spot" market for contract terms of
generally 30 days, or less. In response to changes currently taking place in
the gas industry, the Company has been de-emphasizing its short-term markets,
and an increasing proportion of its revenues are earned pursuant to long-term
sales contracts, value-added services and other energy management services
described below. However, short-term or "spot" sales of natural gas comprised
50% of the Company's sales of natural gas in 1994. These activities will
continue to play a critical role in the Company's overall strategy because they
provide an important source of market intelligence, while serving a portfolio
balancing function. Because most of the Company's gas purchase and sales
contracts contain market-sensitive pricing mechanisms and because of the
Company's risk management efforts, the Company is essentially insensitive to
changes in natural gas prices.
Some of the Company's gas purchase and sales contracts are terminable
by either the Company or its customers upon relatively short notice (generally
30 to 90 days). This contract structure is designed to maintain the Company's
flexibility to respond to changes in customer needs, market conditions and
regulations.
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Recent regulatory changes, specifically FERC Order No. 636, have
mandated that gas distribution companies and electric utilities purchase gas
supplies from merchants other than their traditional suppliers, which were
interstate pipelines. As a result of such regulatory changes, utilities and
end-users holding supply contracts with interstate pipelines are now able to
convert those contracts to firm pipeline transportation capacity and thereby
assure delivery of their new supply sources. During 1994, the Company
delivered approximately 289,000 MMBtu of gas per day under term sales
contracts with gas distribution companies and electric utilities.
The Company, through its subsidiaries, offers end-users contracted
management services to reduce or eliminate administrative expense associated
with energy procurement and assists natural gas producers in managing the
delivery of their product to market through gas volume accounting,
transportation and related services. Customers for the Company's energy
management services are typically larger industrial, commercial and
governmental consumers that operate multiple facilities in various geographic
areas or producers that desire to avoid the administrative complexity and costs
of natural gas marketing and transportation regulatory requirements. These
value-added energy service contracts are generally long-term (three to five
years). The Company believes that its value-added service approach enhances
its ability to respond to evolving customer and producer requirements in the
changing natural gas industry.
Natural gas prices have become extremely volatile over the past two
years. Mid-month price volatility has increased from typically five to ten
cents per MMBtu during 1992 to as much as 80 cents per MMBtu during 1994. The
Company has begun to assist customers and producers in managing the risk
associated with such changes in natural gas prices. This is accomplished by
utilizing various financial instruments such as natural gas futures contracts,
options and swap arrangements. In addition, the Company may provide such
services via fixed-price sales or supply contracts which are then coupled with
these financial instruments to hedge price risk exposure to the Company. Such
hedging strategies are subject to inefficiencies in the financial instruments
utilized, as well as management's judgment in the design and execution of the
strategies. Another tool which the Company utilizes in its gas sales and
purchase contracts to combat price volatility is market-sensitive pricing which
reflects monthly and/or daily commodity pricing.
In connection with the Adobe Merger, AGPC, Santa Fe and Santa Fe
Energy Operating Partners, L.P. ("SFEOP") entered into a Master Gas Purchase
Contract (the "Gas Contract"). Following the Adobe Merger, the Company, which
succeeded to the rights and obligations of AGPC under the Gas Contract,
assigned its interest in the Gas Contract to a subsidiary, and, effective
December 31, 1994, SFEOP was merged with and into Santa Fe. 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 existing domestic natural gas
production as well as certain natural gas production that Santa Fe has the
right to market. In addition, the Company has the right to purchase new
production from certain development properties of Santa Fe. The price to be
paid by the Company for natural gas purchases under the Gas Contract is based
on generally recognized published price indices. The Gas Contract provides,
among other things, terms (i) for the release of gas dedicated under the Gas
Contract, (ii) for payment by the Company and (iii) for termination of the Gas
Contract under certain conditions. See "Item 13. Certain Relationships and
Related Transactions."
Natural Gas Facilities Operations
The Company's natural gas facilities operations include natural gas
gathering, treatment, processing, underground storage, intrastate transmission
and contract production operations, as well as field and technical services,
and are conducted through the Company's subsidiaries. These operations are
concentrated in southeastern New Mexico, the Louisiana Gulf Coast and the
Permian Basin of West Texas. Assets employed to conduct these operations
include Llano's 90-mile intrastate pipeline in southeastern New Mexico (the
"Llano Pipeline"), 12 separate gathering systems consisting of 1,144 miles of
pipeline, 5 gas processing facilities, an underground gas storage facility with
a current working capacity of approximately 6 billion cubic feet ("BCF") of
gas, and one 74-mile gas transmission system located in Texas (the "Power-Tex
System").
The Llano Pipeline, which has a design capacity of approximately
180,000 MMBtu of gas per day, is capable of delivering gas to four different
interstate pipelines and directly to three end-users, as well as receiving gas
from three interstate pipelines. In 1994, Llano transferred to HGG&P
approximately 573 miles of gathering lines and related facilities. The
Company, through its various subsidiaries, purchases gas from over 55 producers
connected, via
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the HGG&P gathering system, to the Llano Pipeline and sells the gas directly to
end-user customers or delivers the gas into one of the interstate pipelines for
sale by the Company. The Company, through its various subsidiaries, also
transports natural gas through the Llano Pipeline for third parties and is paid
a transportation fee for such services. In connection with gas moved through
the Llano Pipeline, the Company, through its various subsidiaries, also
provides gas treatment and contract operation services. During 1994, an
average of approximately 102,000 MMBtu of natural gas per day moved through the
Llano Pipeline, as compared to approximately 114,000 MMBtu of natural gas per
day in 1993 and approximately 124,000 MMBtu of natural gas per day in 1992.
The 12 gas gathering systems gathered approximately 111,000 MMBtu of
natural gas per day during 1994. The Power-Tex System, which the Company
acquired through the Adobe Merger, transported approximately 30,000 MMBtu of
natural gas per day during 1994 (net to the Company's interest). During 1993,
the Power-Tex System transported approximately 24,000 MMBtu of gas per day (net
to AGPC's interest). In certain circumstances, these pipeline systems are used
to transport or gather natural gas for others in return for a transportation
fee.
Connected to the Llano Pipeline are three natural gas processing
facilities (one of which is inactive) capable of processing approximately
85,000 MMBtu of natural gas per day. These facilities extract NGLs, including
propane, ethane, butanes and natural gasoline, from the natural gas stream, at
which point the mixed stream of liquids is sold to United. During 1994,
approximately 44 million gallons of NGLs were extracted and sold from these
facilities, and approximately the same volumes were extracted and sold from
these facilities during 1993. These volumes remained fairly constant from 1993
to 1994 primarily because of the fact that, in April 1994, one of the Company's
gas processing plants sustained damage as a result of a fire. The plant was
non-operational until October 1994 when repairs were completed. The damage to
the plant was fully covered by insurance, except for a small deductible amount.
In addition, the Company has interests in two gas processing
facilities which were acquired through the Adobe Merger and which are not
connected to the Llano Pipeline; however, one of these facilities was not in
operation during 1994. These facilities produced approximately 24 million
gallons of NGLs (net to AGPC's interest) during 1993, and the one operational
facility produced approximately 11 million gallons of NGLs (net to the
Company's interest) during 1994.
Connected to the Llano Pipeline is a natural gas storage facility.
This facility has current working capacity of approximately 6 BCF. This
capacity could be increased to approximately 9 BCF by decreasing mechanical
limits on withdrawals from and injections into the facility. The Company,
through its subsidiary, offers this storage capacity to third parties on a fee
basis. During 1994, storage capacity of approximately 5.5 BCF was leased to
other parties.
NGL Marketing and Transportation
Through December 31, 1994, the Company, through United, engaged in NGL
purchasing, transporting, marketing and trading, primarily in Oklahoma, Texas
and Louisiana. United generally purchases NGLs from "landlocked" gas
processing plants and transports the liquids through its fleet of 31 trucks to
injection points on common carrier and private pipelines. Five of these
injection facilities are owned and operated by United. The liquids are then
transported via the pipelines to fractionation plants, at which point the
liquids are normally sold. United also markets NGLs which are not transported
by its own trucks. Because the NGLs transported by United are highly volatile,
the Company has carried insurance, in amounts it believes are in line with
industry practice, against risks involved in transporting these liquids.
During 1994, United transported approximately 129 million gallons of NGLs and
marketed approximately 382 million gallons of NGLs.
In December 1992, United entered into a three-year contract to market
all NGLs produced by a large independent oil and gas producer. This
transaction involves marketing approximately 4 million gallons per month on
behalf of this particular producer.
The Company sold United effective January 1, 1995. See "-- Subsequent
Events -- Sale of United LP Gas Corporation" above.
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Competition
The Company, through its various subsidiaries, competes with gas
pipelines, producers and other gas marketers primarily on the basis of
market-responsive pricing, reliability of performance, and customer service.
The Company believes that its ownership and control of gathering and
transmission facilities, its detailed knowledge of market and regulatory
factors affecting the industry and its ability to respond quickly and flexibly
to changes in market conditions, governmental regulations and customer needs
have been important factors in its success to date. The Company devotes
significant management time and resources to monitoring closely federal and
local gas regulation developments and, where appropriate, seeking regulatory
enforcement or other appropriate action.
The Company faces intense competition in marketing gas to end-user
customers and local distribution companies. Its competitors include the major
integrated oil companies, pipeline-affiliated marketing companies, and regional
gas gatherers, brokers and marketers of widely varying sizes, financial
resources and experience. Some of these competitors, such as the major
integrated companies, have capital resources many times greater than the
Company's and control substantially greater supplies of natural gas. In some
cases, local utilities and gas distribution companies (some of which are
customers of the Company) also engage, directly and through affiliates, in
marketing activities that compete with the Company's subsidiaries.
Environmental Matters
The Company believes that it is in substantial compliance with
applicable material environmental regulations. The construction and operation
of pipelines, plants and other facilities for transporting, gathering,
processing, treating or storing natural gas and other products are subject to
federal, state and local environmental laws and regulations, including those
that can impose obligations to clean up hazardous substances at the locations
at which the Company operates or to which it sends waste for disposal. In most
instances, the applicable regulatory requirements relate to water and air
pollution control or solid waste management measures. Environmental regulation
can increase the cost of planning, design, initial installation and operation
of such facilities. Historically, the Company's expenditures for environmental
control facilities and for remediation have not been significant in relation to
its results of operations. The Company believes, however, that it is
reasonably likely that the trend in environmental legislation and regulations
will continue to be towards stricter standards. The Company is not aware of
any future environmental standards that it believes are reasonably likely to be
adopted that will have a material adverse effect on the Company's results of
operations, but cannot rule out that possibility. It is not anticipated that
the Company will be required in the near future to expend amounts that are
material in relation to its total capital expenditures program by reason of
environmental laws and regulations, but inasmuch as such laws and regulations
are frequently changed, the Company is unable to predict the ultimate cost of
compliance.
Governmental Regulation
The production, transportation and certain sales of natural gas are
subject to federal, state or local regulations which have a significant impact
upon the Company's energy products and services business. Regulation at the
federal level of domestically produced or transported natural gas is
administered primarily by the FERC pursuant to the Natural Gas Act (the "NGA")
and the Natural Gas Policy Act of 1978 (the "NGPA"). Maximum selling prices of
certain categories of gas, whether sold in interstate or intrastate commerce,
previously were regulated pursuant to NGPA. The NGPA established various
categories of gas and provided for graduated deregulation of price controls of
several categories of gas and the deregulation of sales of certain categories
of gas. All price deregulation contemplated under the NGPA has already taken
place. Subsequently, the Natural Gas Wellhead Decontrol Act of 1989 terminated
all NGA and NGPA regulation of "first sales" of domestic natural gas on January
1, 1993. The sale for resale of certain natural gas in interstate commerce is
regulated, in part, pursuant to the NGA, which requires certificate and
abandonment authority to initiate and terminate such sales. In addition,
natural gas marketed by the Company is usually transported by interstate
pipeline companies that are subject to the jurisdiction of the FERC. See "--
Order No. 636" below. Similarly, some of the transportation and storage
services provided by Llano are subject to FERC regulation under section 311 of
the NGPA. These services are frequently sold to gas distribution companies
that contract with interstate pipeline companies for transportation from the
Llano facility to their respective service areas. Section 311 permits
intrastate pipelines under certain circumstances to sell gas to, transport gas
for, or have gas
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transported by, interstate pipeline companies, and assign contract rights to
purchase surplus gas from producers to interstate pipeline companies without
being regulated as interstate pipelines under the NGA.
Llano and HGG&P. In 1994, Llano transferred to HGG&P approximately 573
miles of gathering lines and related facilities in Lea and Eddy Counties, New
Mexico. Following this transfer, Llano holds approximately 90 miles of
pipeline and related underground storage facilities that are used (a) to supply
gas in intrastate commerce to certain electric generating facilities owned by
non-affiliated entities; and (b) to provide interstate transportation and
storage services under section 311 of the NGPA.
(a) The HGG&P Petition for Declaratory Order. In 1994, HGG&P
petitioned the FERC for a declaratory order that the facilities it obtained from
Llano met the FERC's test for "gathering" facilities and were therefore not
subject to the FERC's regulation under the NGA. This petition for declaratory
order was granted on November 14, 1994 and is final and non-appealable. The
effect of the declaratory order is to make it clear that the subject HGG&P
facilities are not subject to regulation by the FERC under the NGA and are thus
only subject to appropriate state authorities.
(b) The Llano Rate Filing. In addition to Llano's intrastate sales
for power generation, Llano provides interstate storage and transportation
services under section 311 of the NGPA. These services are subject to rate
regulation by the FERC, which has established regulations governing the rates,
construction of facilities and conditions of service applicable to section 311
service performed by intrastate pipelines. Pursuant to these rules and related
FERC orders, Llano is currently required to obtain approval of its rates at
least once every three years. Llano's current section 311 rates were approved
by an order issued August 13, 1991, which also required Llano to seek new rate
approval no later than July 3, 1993.
After the July 3, 1993 date, Llano has met informally with the FERC
staff to inform them that Llano was preparing to restructure ownership of its
facilities by transferring the gathering facilities to HGG&P and that HGG&P
would be petitioning for a declaratory order of the non-jurisdictional character
of the transferred facilities. Llano informed the FERC staff that it intended
to seek new, market-based rates to govern services on the truncated system, once
the transfer filing was made.
In September 1994, after completion of certain related market studies,
Llano filed its petition requesting the FERC to approve market-based rates for
NGPA section 311 services, both storage and transportation. After notice of
the application was published, several non-customer parties intervened in
opposition, claiming that the economic analysis submitted in the filing was not
adequate to justify market-based rates for section 311 service (particularly
for the transportation as opposed to the storage service). None of Llano's
storage or transportation customers expressed any objection to the filing,
however, and the matter is presently the subject of informal settlement
discussions among the parties and the FERC staff. The Company continues to
believe, given the tenor of the Company's informal discussions with the FERC
staff and the past action taken by the FERC in similar circumstances, that
Llano will not be assessed any material penalty due to the failure to submit
the rate filing prior to July 3, 1993.
The Company anticipates that the rate filing will ultimately be
resolved through a negotiated settlement. With regard to possible refunds, it
may be noted that, as part of the 1994 filing, Llano agreed that its rates
charged during the period after July 3, 1993 are subject to refund in the event
the FERC finds in the subsequent rate proceeding that such rates were excessive.
As noted by Llano in its rate filing, however, Llano has been providing storage
and associated transportation services at negotiated rates significantly lower
than the maximum rates approved by the FERC in 1991. Accordingly, the Company
does not believe that Llano will be required to make any material rate refunds.
In early 1995, the FERC issued a call for comments in a generic policy
proceeding to examine the circumstances under which it may appropriately rely
upon competitive market forces to establish rates for various pipeline
services. The FERC's request for comments did not propose any specific rule
changes, however, and it is not anticipated that this proceeding will have any
adverse impact on Llano, the rates that it may charge or the extent of refunds,
if any.
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In 1990, the FERC's broad interpretation of the scope of NGPA section
311 transportation authority was reversed by an appellate court. The FERC has
since issued a new rule (Order 537) interpreting the "on-behalf-of" test found
in section 311. The revised rule requires the on-behalf-of entity to either
have physical custody of and transport the natural gas at some point during the
transaction or hold title to the natural gas for a purpose related to its status
as an intrastate pipeline, local distribution company or interstate pipeline, as
applicable. While the new rules narrowed the scope of transactions that can be
performed under section 311, the Company has not found that this has adversely
affected the Llano Pipeline or the availability of transportation for gas sold
by the Company's subsidiaries.
Except as discussed in the foregoing paragraphs, regulation of natural
gas gathering (other than gathering by interstate pipelines) and intrastate
transportation activities is primarily a matter of state oversight. Regulation
of gathering and transportation activities in New Mexico, as in most other
states, includes various safety, environmental and non-discriminatory purchase
requirements. While some states provide for the rate regulation of pipelines
engaged in the intrastate transportation of natural gas, such regulation has
not generally been applied against gatherers of natural gas. However, Oklahoma
has recently enacted legislation that prohibits the imposition of unjustly or
unlawfully discriminatory gathering rates. The Company's gathering systems
could be adversely affected should they be subjected in the future to the
application of such state or federal regulation.
Order Nos. 436 and 500. Under the rules promulgated by the FERC
beginning in 1985 (the "Order 436/500 Rules"), transportation service by
interstate pipelines must be provided on an open access, nondiscriminatory
basis. The effect of the Order 436/500 Rules has been to enable the Company,
through its subsidiaries, to market natural gas as well as other services to a
broad array of customers via the national network of natural gas transportation
and distribution facilities. The opportunity to compete directly with other
users for firm or interruptible interstate transportation services at
nondiscriminatory rates and terms has substantially increased the Company's
access to such services and its ability to arrange for transportation of its
gas to customers, a significant factor in the growth of the Company's gas
marketing operations.
The Order 436/500 Rules were challenged in the United States Court of
Appeals. After a number of changes were made by the FERC in response to
several rulings by such Court from 1987 to 1990 (none of which altered the
basic open access requirement of the rules), the substantive provisions of the
Order 436/500 Rules have been upheld by the courts and become final.
Order No. 636. In the summer of 1991, the FERC initiated further
rulemaking proceedings for the purpose of modifying the terms and conditions
under which open access transportation is provided in order to ensure that
"unbundled" transportation service (i.e., transportation service not sold as an
integral part of a sale of natural gas supplies) is provided on an open access
basis "comparable" to the transportation services that the pipelines "bundle"
with their own, regulated sales. These proceedings became generally known in
the industry as the "Mega-NOPR" (for "Mega Notice of Proposed Rulemaking")
proceedings. The FERC stated that its goal, recognizing that pipelines have
become predominantly transporters, not sellers, of gas, was to "create a
regulatory framework that will accommodate the meeting of as many gas sellers
and gas buyers as possible," and to thereby further enhance competition in the
domestic natural gas markets.
Beginning in April 1992, the FERC adopted final rules in this
proceeding which were designated as Order No. 636 (the "Order 636 Rules"). The
Order 636 Rules are currently in effect but are subject to pending requests for
judicial review and possible modification or reversal as a result.
The Order 636 Rules reaffirm the basic open access transportation
regime of the Order 436/500 Rules and extend that regulatory approach in several
ways:
(i) Equality of service -- the equal access rules. The
Order 636 Rules required interstate pipelines to provide a level of
transmission and storage service that is equal for all shippers
regardless of whether the gas commodity is sold by the interstate
pipeline or by a competing gas merchant. In particular, the rules
required interstate pipelines to provide equal access in a number of
specified areas, including: equal access to transmission facilities;
equal access to most storage facilities; equal and timely access to
information relevant to the availability of the open access
transmission services; equal access to a new flexible delivery
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service; and equal access to a pipeline's contract rights to receive
certain transmission services from upstream pipelines.
(ii) Flexibility of service. The Order 636 Rules expanded
shippers' ability to use all receipt and delivery points on a pipeline
on a more flexible basis than in the past, such that, subject to
reasonable pipeline operating requirements, shippers are able to
receive natural gas from any person at any point on the pipeline
facilities and deliver gas to any person at any point as long as the
receipt and delivery points are within the path of the firm
transportation capacity to which the shipper is entitled and for which
it pays. The rules also prohibited pipeline tariff provisions that
inhibit the development of "market centers" (areas where gas may be
delivered into multiple pipeline interconnects). Defining the scope
and operation of this requirement has been left to case-by-case
implementation procedures.
(iii) Mandatory "unbundling" of pipeline system sales. The
Order 636 Rules found that the traditional interstate pipeline
practice of making "bundled," city-gate firm gas sales causes
considerable competitive harm to all segments of the natural gas
industry and constitutes an unlawful restraint of trade which is not
balanced by the "no-notice" aspect of the service. This "bundled"
sales service is the traditional pipeline sales service in which the
interstate pipeline sells the gas commodity to retail local
distribution companies ("LDCs") on a delivered basis at the point of
interconnection between the physical facilities of the LDC and the
interstate pipeline.
As a remedy to this finding of unlawful restraint of trade,
the FERC under Order 636 ordered all interstate pipelines to
"unbundle" their gas sales from the transmission, storage and related
services and make any sales at aggregation points in or near gas
production areas.
Pipelines have been allowed to make such unbundled sales
pursuant to new "blanket" certificate authorizations under which the
FERC intends to provide great pricing and operational flexibility
("light-handed regulation" of unbundled pipeline sales). This
light-handed regulation has generally allowed market-based pricing of
gas sales by the unbundled pipeline merchant. The Order 636 Rules
contemplate that all gas merchants (unbundled pipelines, producers and
marketers) will be able to contract for or manage the various
unbundled component services in order to offer a "repackaged"
delivered service to LDCs and others.
To ensure that the pipeline's unbundled gas merchant service
does not gain an improper competitive advantage from its association
with the pipeline-as-transporter, the Order 636 Rules forbade the
pipeline-as-transporter from giving any preference to shippers of gas
sold by the pipeline over shippers of gas sold by any other merchant
in matters relating to open access transportation. To implement this
prohibition, the Order 636 Rules require the operating employees of
merchant and transportation departments of all interstate pipelines to
"function independently" of each other "to the maximum extent
practicable" and to adopt various record-keeping and reporting
requirements regarding dealings between the pipeline-transporter and
the pipeline-merchant.
(iv) Customer option to terminate supply contracts with
pipelines. The Order 636 Rules allowed LDCs to reduce or even
terminate their existing contracts to purchase gas from the
pipeline-as-merchant. The purpose of this requirement was to enable
those customers to freely negotiate to purchase gas from the pipeline
under its new market-based sales service or to purchase gas from other
gas suppliers. This restructuring of contract entitlements was
completed in the individual pipeline restructuring proceedings.
(v) Capacity assignment and "release" programs. The
Order 636 Rules adopted certain capacity reallocation or "release"
mechanisms, the stated purpose of which was to allow LDCs and other
firm shippers the ability to better access supplies on pipeline
systems to which they are not directly interconnected and to
indirectly make available to others the firm capacity that the shipper
holds but is not using. The intent of these provisions is to
facilitate the development of a secondary transportation market while
eliminating the potential for firm shippers to unduly discriminate in
the assignment of capacity rights. The release program has enabled
the Company to mitigate costs of certain pipeline transmission
contracts and to acquire capacity at lower costs than previously to
serve some markets.
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(vi) Pregranted abandonment. The Order 636 Rules adopted
several procedures governing a pipeline's ability under the NGA to
terminate service at the expiration of the contract term. In general,
these provisions allow a pipeline to terminate transmission service at
the end of the contract term for (A) all contracts for interruptible
transmission services and (B) short-term contracts for firm
transmission contracts (i.e., contracts of one year or less). For
longer-term contracts for firm transmission service, the Order 636
Rules adopt a "right of first refusal" mechanism which allows the firm
shipper a federal right to extend its service under specified
circumstances. Finally, the Order 636 Rules allow the termination of
a pipeline's sales obligation at the expiration of the contract for
the unbundled sales service.
(vii) Policy favoring "straight fixed-variable" rates. As
a general matter, the FERC has required pipeline transportation rates
to be set so as to recover all fixed costs (including the pipeline's
return on equity and associated income taxes) through fixed monthly
demand charges. This shift has tended to increase the price of
reserving firm capacity while lowering the price of actually using an
incremental unit of the reserved firm capacity.
(viii) Transition costs. The Order 636 Rules adopted major
changes in how pipelines recover costs associated with certain
take-or-pay contracts, upstream transmission contracts and certain
other costs of the transition to operations in the Order 636 Rules.
These changes essentially allow all such costs which are prudently
incurred to be passed on by the pipeline to its firm open-access
transportation customers. This aspect of the Order 636 Rules
therefore tends to increase costs of transportation on affected
pipelines, although, due to the pricing structure of most of its
purchase, sales and transportation transactions, the Company does not
believe that this has an adverse effect on its operations.
(ix) Implementation and effectiveness. The Order 636
Rules are subject to pending court review. A briefing schedule has
been established which will extend through the fourth quarter of 1994,
making it unlikely that any decision will be reached until at least
the first quarter of 1996. Hence, it is not certain to what extent
the Order 636 Rules will be affirmed following completion of judicial
review. The Order 636 Rules are effective during this process,
however, and following case by case rulings by the FERC during 1992
and 1993 are currently in place. Many of these individual rulings are
also the subject of court challenges. The court where most of the
cases were filed has indicated that it will not proceed with review
until after review of Order 636 is complete.
While the first phase of implementation of the Order 636 Rules is now
largely completed, many of the operational and other implementation issues are
expected to continue to evolve in the next 12 to 18 months. The Company
anticipates that these regulatory developments will generally present
additional opportunities to the Company and its subsidiaries in providing gas
sales and/or energy and capacity management services while creating certain
risks associated with potential penalties for shippers exceeding allowed
tolerance levels.
Other Regulations. In October 1992, the Energy Policy Act of 1992 was
enacted. This Act streamlined the permitting process necessary to import
Canadian gas and altered the treatment of such gas under the NGPA, eliminating
the FERC's jurisdiction over the price of non-pipeline sales of gas imported
from Canada. Canadian gas imports still require import authorizations from the
Department of Energy's Office of Fossil Energy under section 3 of the NGA and
construction and siting authorizations, where applicable, from the FERC. These
changes could enhance the ability of Canadian producers to export gas to the
United States and increase competition in the domestic natural gas market.
In December 1992, the FERC issued Order No. 547, governing the
issuance of blanket marketer sales certificates to all gas sellers other than
interstate pipelines. The order eliminates the need for gas producers and
marketers to seek specific authorization under section 7 of the NGA from the
FERC to make certain sales of natural gas, such as imported gas and gas
purchased from interstate pipelines. Instead, effective January 7, 1993, these
gas sellers, by operation of the order, have been issued blanket certificates
of public convenience and necessity allowing them to make jurisdictional gas
sales for resale at negotiated rates without seeking specific FERC
authorization. The FERC intends Order No. 547, in tandem with Order No. 636,
to foster a competitive market for natural gas by giving gas purchasers access
to multiple supply sources at market-driven prices. Order No. 547 may also
increase
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competition in the natural gas market while presenting opportunities for the
offering of supply and capacity management services.
Prior to July 1994, many of the Company's sales were "first sales"
under the NGPA (and therefore not subject to the FERC's NGA regulation even
when sold for resale in interstate commerce), while certain of the Company's
sales were authorized under a blanket certificate issued by the FERC under the
NGA that allow fully market-based pricing without any further certificate,
abandonment, filing or reporting obligations.
In July 1994, the FERC (without prior opportunity for public comment)
repealed a number of its regulations that had applied to the regulation of
"first sales" of natural gas under the NGPA prior to the complete deregulation
of such sales on January 1, 1993 under the Natural Gas Wellhead Decontrol Act
of 1989. Included in these repealed regulations was a provision that defined
the term "first sale". The effect of the repeal is that all of the Company's
interstate gas wholesales are now authorized under a blanket certificate
pursuant to Order No. 547. The FERC has stated that it believes the Order 547
certificates allow holders to operate exactly as if they were
non-jurisdictional companies. The Company believes the "first sale" repeal is
inconsistent with the applicable law, including the procedural requirements of
the NGPA and has therefore sought judicial review of the FERC's action.
Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by the United States Congress, the
FERC, state public utility regulatory bodies and the courts. The Company cannot
predict when or whether any such proposals or proceedings may become effective,
or their effect, if any, on the Company's operations. In addition, the natural
gas industry historically has been very heavily regulated; therefore, there can
be no assurance that the light-handed regulatory approach currently pursued by
the FERC and Congress will continue indefinitely into the future.
Certain pipeline systems which the Company acquired as a result of the
Adobe Merger are subject to the jurisdiction of the Railroad Commission of
Texas (the "RRC"). The RRC has the authority, under the Texas Gas Utility
Regulatory Act and other statutes, to regulate the rates, services and
operations of gas utilities in Texas. The Company believes that its activities
subject to such regulation materially comply with all applicable laws and
regulations of the RRC.
OPERATIONS OF UNCONSOLIDATED SUBSIDIARIES
The Company owned an approximate 17% interest in Midwest prior to
December 30, 1993. Midwest's activities center around production from its
existing domestic wells, as well as exploration in the Paris and Aquitaine
Basins of France, where Midwest owns various interests in six oil and gas
exploration permits granted by the French government. On December 30, 1993,
Midwest purchased the Company's 17% interest for $325,000. The Company's
interest in Midwest was reported in its financial statements under the cost
method of accounting.
Prior to November 1994, the Company owned a 40% interest in Beck &
Root Fuel Company ("Beck & Root"), a retail propane sales and distribution
company located in Oklahoma. On November 29, 1994, the Company transferred its
interest in Beck & Root to Independent Gas Company Holdings, Inc.
("Independent") in exchange for $750,000 in cash and a certain number of shares
of Series B Cumulative Redeemable Convertible Preferred Stock of Independent
having a liquidity preference of $1,250,000. The Company's interest in Beck &
Root was reported in its financial statements under the equity method of
accounting.
NUMBER OF PERSONS EMPLOYED
As of December 31, 1994, there were 230 people employed by the Company
and its consolidated subsidiaries.
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ITEM 2. PROPERTIES
NATURAL GAS GATHERING FACILITIES
The Company, through certain subsidiaries, owns, or has an interest
in, 12 natural gas gathering systems. These systems are located in Texas, New
Mexico, Louisiana, Montana and Oklahoma.
TRANSMISSION FACILITIES AND RELATED PROPERTY
The Company, through a subsidiary, owns the Llano Pipeline, a 90-mile
intrastate gas pipeline system in southeastern New Mexico with a throughput
capacity of 180,000 MMBtu of gas per day. The Company, through subsidiaries,
owns the Power-Tex System, a 74-mile gas transmission system located in Texas.
This system has a design capacity of 80,000 MMBtu of gas per day. The Company,
through certain subsidiaries, also owns, or has interests in, and operates five
natural gas processing plants located in southeastern New Mexico and western
Texas with a total design capacity of 125,000 MMBtu of gas per day. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operation." The Company, through a subsidiary, owns and operates an
underground natural gas storage facility adjacent to the Llano Pipeline in
southeastern New Mexico with a current working capacity of approximately 6 BCF
of natural gas.
NATURAL GAS LIQUIDS FACILITIES AND RELATED PROPERTY
During 1994, the Company, through United, operated 31 tractors (6
owned and 25 leased) and 31 NGL trailers (28 owned and 3 leased), primarily in
Oklahoma and Texas. The Company owned and operated five proprietary pipeline
injection points and was a joint owner in a sixth facility, each of which
included storage facilities. Additionally, the Company had exclusive injection
rights at four facilities owned by others. The Company sold United effective
January 1, 1995. See "Item 1. Business -- Subsequent Events -- Sale of United
LP Gas Corporation."
OTHER
The Company is currently headquartered in Dallas, Texas, where it
leases approximately 40,000 square feet of office space. Various subsidiaries
of the Company lease office space in Washington, D.C.; Denver, Colorado; and
Chicago, Illinois. Additionally, the Company owns real estate in Hobbs, New
Mexico, where Llano maintains offices and service facilities.
ITEM 3. LEGAL PROCEEDINGS
FIXED PRICE CONTRACT DISPUTE
On July 16, 1991, Western and PDH Energy Partnership, Ltd. ("PDH")
entered into a Gas Purchase and Sale Contract (the "PDH Contract") obligating
Western to deliver to PDH, subject to certain conditions, through 2007, all of
PDH's requirements for natural gas up to a maximum of 2,000 MMBtu per day. The
price to be paid by PDH for gas delivered under the PDH Contract was $1.50 per
MMBtu during the first year of the contract with provisions for escalation of
4% per year during each of the first 10 years of the contract, and 6% per year
thereafter. By letter dated September 15, 1993, Western notified PDH that
Western was exercising its right to terminate the PDH Contract. The PDH
Contract contained a provision permitting Western to terminate the PDH Contract
in the event of any acts by governmental authorities which, in Western's sole
judgment, are unduly burdensome or unacceptable. PDH has disputed Western's
ability to terminate the PDH Contract, and attempts to settle the dispute have
proven unsuccessful to date. PDH has threatened to sue Western for breach of
contract. In addition, PDH's project lender has threatened suit against Western
based on a consent to assignment of the PDH Contract executed by Western. If
either or both of such suits should be filed, Western intends to dispute such
claims (to both of which it believes that it has meritorious defenses), but
there can be no assurance that Western will prevail in either matter. While,
to the knowledge of the Company, no specific damage claims have been made to
date, should either PDH or the project lender, or both, prevail, the resulting
judgment(s) could have a material adverse effect on the Company and its results
of operations.
13
<PAGE> 17
PERSONAL INJURY CASE
On October 6, 1992, United was named as a defendant, along with several
other companies, in a lawsuit involving a propane explosion in which two
individuals were severely burned. One of the individuals died 13 days after
the accident. The case, Annie Moore, et al. v. A-1 Propane, et al., was filed
in the District Court of Harris County, Texas, 113th Judicial District. The
plaintiffs alleged that United was the supplier of the propane which exploded
and that United, along with the other defendants in the case, were grossly
negligent, inter alia, in their failure to insure that the propane was
adequately odorized. The plaintiffs requested punitive damages equal to four
times the amount of actual damages. United had primary insurance coverage for
up to $1,000,000. Based upon instructions to its insurance broker,
Meyers-Reynolds & Associates, Inc. ("Meyers-Reynolds"), United believed it had
purchased excess coverage insurance policies sufficient to provide coverages
for risks such as those raised by the plaintiffs' claims; however, the
insurance carriers denied coverage.
On April 27, 1994, the parties entered into a Settlement Agreement
under the terms of which United's primary insurance policy limits of $1,000,000
were paid to the plaintiffs, and United agreed to assign to the plaintiffs and
to Texas Eastern Products Pipeline Company ("TEPPCO"), with whom it had agreed
to maintain certain insurance coverages for the protection of United and TEPPCO,
any claims it might have with respect to the failure of Meyers-Reynolds or
excess insurance carriers to have excess insurance coverage in place to protect
United from claims asserted in the lawsuit. In exchange, the plaintiffs agreed
to limit execution on any judgment against United to United's claims against
Meyers-Reynolds and such excess insurance carriers, thus limiting United's
exposure to its primary insurance policy limits. Under the terms of an
Assignment and Covenant to Limit Execution entered into by the parties in May
1994, United assigned to the plaintiffs and TEPPCO its claims against
Meyers-Reynolds and the excess insurance carriers.
JOINT VENTURE CASE
In December 1990, West Texas Transmission Corp. and Brent Jordan filed
a lawsuit in the District Court of Harris County, Texas, 190th Judicial
District, against a number of defendants, including AGPC, Adobe Gas Co. and
Adobe Gas Marketing Co. As a result of the Adobe Merger, Adobe Gas Co. (now
known as Hadson Gas Co.) and Adobe Gas Marketing Co. (now known as Hadson Gas
Marketing Co.) are subsidiaries of the Company. This lawsuit arose out of the
purchase, in 1987, by Adobe Gas Co. of the plaintiffs' joint venture interests
in the Power-Tex joint venture. Plaintiffs alleged, inter alia, that Adobe Gas
Co., as the operator of the Power-Tex joint venture, failed to disclose certain
material information which affected the value of the joint venture interests
sold to Adobe Gas Co. The plaintiffs alleged causes of action for breach of
fiduciary duty, breach of the duty of good faith and fair dealing, fraud and
conspiracy, as well as other allegations.
On November 18, 1994, the parties entered into a Settlement Agreement
and Release (the "Settlement Agreement"), and an agreed Final Take Nothing
Judgment was entered by the Court. Under the terms of the Settlement Agreement,
the Company was obligated to pay to the plaintiffs the sum of $2,350,000. The
Company's share of the settlement amount was funded by Santa Fe under a 10-year
subordinated balloon note (the "Santa Fe Note") bearing a nine percent interest
rate. Under the terms of the Santa Fe Note, interest is payable annually, and
the principal amount is due at the expiration of the 10-year period. In
consideration for the Company's participation in the settlement, Santa Fe also
agreed to pay to the Company the amount of $117,500 per year for six years. In
connection with the Merger, Parent will purchase the Santa Fe Note, and the
yearly payments of $117,500 will cease. See "Item 1. Business -- Subsequent
Events -- Acquisition of the Company by LG&E Energy Corp."
CLASS ACTION COMPLAINT
On December 21, 1994, Ernest Engel, a stockholder of the Company
("Engel"), filed a purported class action lawsuit styled as Engel v. Hadson
Corporation, et al., Civil Action No. 13934 (the "Lawsuit"), pending in the
Court of Chancery (the "Court") for the State of Delaware in New Castle County.
In his complaint, Engel alleged that an offer made by El Paso Natural Gas Co.
to acquire the Company was grossly unfair and that the Board of Directors had
breached its fiduciary obligations to the Company's stockholders by failing to
obtain the maximum value per share that could be received in an unfettered
market for control. On February 10, 1995, prior to the execution of the
Securities Purchase Agreements and the Merger Agreement, an agreement (the
"Memorandum of Understanding")
14
<PAGE> 18
was reached among all the parties to such litigation to settle all litigation
which was brought in the Court. The Memorandum of Understanding provides,
among other things, that the Special Committee agreed to inform the Board of
Directors of Engel's views regarding the Merger, that the Company will pay not
more than $185,000 for Engel's legal fees and expenses and that the Company
will bear the cost of notice to the class members in connection with the
settlement of the Lawsuit. The Memorandum of Understanding is subject to court
approval and consummation of the Merger.
In addition to the matters mentioned above, the Company is from time to
time involved as a defendant in litigation incidental to its business. The
Company does not believe that any such other lawsuits in which the Company is
currently involved will have a material adverse effect on the Company's
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON STOCK
The Company Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "HAD." As of December 31, 1994, the Company did not
meet certain of the NYSE's continued listing criteria as a result of the
Company's recent financial results, and the NYSE has advised the Company that
careful consideration will continue to be given to the appropriateness of
continued listing of the Company's securities. Accordingly, there can be no
assurance that the NYSE will not delist Company Common Stock in the future if
the Company continues not to meet the NYSE's requirements for continued
listing. If the Merger is consummated, it is anticipated that Company Common
Stock will be delisted.
The following table sets forth, for the periods indicated, the high
and low closing sales prices per share of Company Common Stock, as reported on
the NYSE Composite Tape. The 1993 prices have been adjusted to give effect to
the approximate one-for-15 reverse split of Company Common Stock which occurred
December 14, 1993 through the Adobe Merger.
<TABLE>
<CAPTION>
High Low
------------ -------------
<S> <C> <C>
Year ended December 31, 1993
First quarter $ 4-7/32 $ 2-7/64
Second quarter 4-11/16 2-13/16
Third quarter 4-11/16 3-3/36
Fourth quarter (1) 2-5/8 2-7/64
Year ended December 31, 1994
First quarter 3-3/4 2-5/8
Second quarter 3 2-3/8
Third quarter 2-5/8 2
Fourth quarter 2-1/2 1-7/8
</TABLE>
(1) The Adobe Merger, which effected a restructuring of the Company's debt
and equity capitalization (including an approximate one-for-15 reverse
split of Company Common Stock), was consummated on December 14, 1993.
See "Item 1. Business -- Recent Developments -- Merger of Adobe Gas
Pipeline Company with and into the Company."
15
<PAGE> 19
On March 10, 1995, the closing price per share of Company Common Stock
on the NYSE was $2.625. On March 10, 1995, there were 25,710,483 shares of
Company Common Stock outstanding and approximately 3,948 holders of record of
Company Common Stock.
DIVIDENDS
The Company has never paid a cash dividend on the Company Common Stock
and will not do so in the foreseeable future. The Company's ability to pay
cash dividends on Company Common Stock is dependent upon its financial
condition. The Company is currently prohibited from paying cash dividends on
its capital stock under that certain securities purchase agreement entered into
by the Company and Prudential in connection with the Adobe Merger. In
addition, the Company's current bank loan agreement restricts the Company's
ability to pay dividends.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below is certain selected historical consolidated financial
information of the Company as of December 31, 1990, 1991, 1992, 1993 and 1994
and for each of the five years in the period ended December 31, 1994. The
selected historical consolidated financial information as of December 31, 1993
and 1994 and for each of the three years in the period ended December 31, 1994
has been derived from the Company's audited consolidated financial statements
appearing elsewhere herein. The selected historical consolidated financial
information as of December 31, 1990, 1991 and 1992, and for each of the two
years in the period ended December 31, 1991, has been derived from audited
historical consolidated financial statements previously filed with the
Commission but not contained or incorporated herein. The following information
should be read in conjunction with "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and related notes appearing elsewhere herein.
16
<PAGE> 20
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1990(1) 1991 1992 1993 1994
----------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales $ 446,296 439,396 427,781 522,661 752,470
Interest and other income 783 687 478 495 1,568
Interest on tax refund - 1,766 - - -
Gain on sale of assets 2,407 703 - 6,355 -
Gain on restructuring - - 925 - -
Equity in earnings (loss) of unconsolidated
affiliates 2,897 (987) 1,716 629 -
----------- ------- ------- ------- -------
452,383 441,565 430,900 530,140 754,038
----------- ------- ------- ------- -------
Expenses:
Cost of sales and services 417,446 414,220 410,960 514,117 723,546
Depreciation, depletion and amortization 7,358 6,733 6,111 6,280 10,957
Write-off of goodwill - - - 3,077 -
Selling, general and administrative 20,470 16,743 15,593 16,407 16,888
Interest (2) 5,544 10,822 13,441 2,648 5,154
Write down of NGL inventory - 2,500 - 1,002 -
Settlement of litigation - - 1,000 475 -
Reorganization and other - - - 2,704 530
Income taxes (benefit) (300) (304) (1,139) (694) (2,004)
----------- ------- ------- ------- -------
$ 450,518 450,714 445,966 546,016 755,071
----------- ------- ------- ------- -------
Earnings (loss) from continuing operations $ 1,865 (9,149) (15,066) (15,876) (1,033)
Preferred stock dividend requirements - - 61 293 5,772
----------- ------- ------- ------- -------
Earnings (loss) from continuing operations
attributable to common stock $ 1,865 (9,149) (15,127) (16,169) (6,805)
=========== ======= ======= ======= =======
Earnings (loss) from continuing operations per
and common equivalent share (4) $ .75 (3.64) (5.35) (1.93) (.26)
Dividends per common share $ - - - - -
Shares used to compute earnings (loss) per
common share from continuing operations (4) 2,497 2,517 2,826 8,383 25,690
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1990 (1) 1991 1992 1993 1994
----------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total assets $ 224,874 172,623 154,850 210,273 205,405
Net working capital, excluding current
maturities of long-term debt $ 15,538 10,251 1,540 5,134 (2,583)
Long-term debt $ 144,183 116,357 56,400 55,800 57,372
Stockholders' equity (deficit) (3) $ (18,735) (22,353) 19,081 39,473 38,436
</TABLE>
(1) In February 1990, Hadson Energy Resources Corporation ("HERC"), a
newly formed subsidiary to which the Company had transferred substantially all
of its oil and gas exploration, development and production activities, sold
approximately 51% of its common stock in a public offering. Accordingly,
subsequent to that date the Company's 49% investment in HERC was accounted for
using the equity method until the remaining 49% investment in HERC was sold in
July 1993.
(2) Interest expense related to continuing operations was higher in 1991
as compared to 1990 as a result of a change in the estimated amount of interest
expense on long-term debt attributable to discontinued operations.
(3) The defense systems and power systems operations have been accounted
for as discontinued operations and,
17
<PAGE> 21
therefore, are not included in the above Statement of Operations Data, which is
presented on the basis of continuing operations. Losses attributable to the
defense systems operations for each of the years in the two-year period ended
December 31, 1991 were $2,033,000 and $0, respectively. The year ended December
31, 1990 also included a loss of $142,529,000 from the sale of the defense
systems operations. Earnings attributable to the power systems operations for
each of the years in the two-year period ended December 31, 1991 were $288,000
and $0, respectively. The years ended December 31, 1991 and 1992 included a gain
of $4,829,000 and a loss of $8,103,000, respectively, from the sale of Hadson
Power Systems, Inc. The year ended December 31, 1993 included a gain of
$5,553,000 related to a contract settlement from defense systems.
(4) The Adobe Merger, which was consummated December 14, 1993, effected an
approximate one-for-15 reverse split of the Company Common Stock. Share and per
share amounts presented were computed after giving effect to the reverse split
for all periods. Subsequent to the Adobe Merger there were 25,689,147 shares of
Company Common Stock outstanding.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The ability of the Company to maintain and grow its level of business
is dependent in large part upon its ability to secure supplies of natural gas
for resale. The ability to secure these supplies is in turn dependent upon the
availability of trade credit, or the willingness of suppliers to sell to the
Company. In evaluating the creditworthiness of the Company, suppliers evaluate
the perceived as well as the actual financial stability of the Company, recent
operating results, levels of potential exposure to the Company, the supplier's
experience with the Company, as well as various other factors. To the extent
that suppliers are unwilling to grant open lines of credit, the Company may
utilize its revolving credit facility to issue stand-by letters of credit in
order to secure all or a portion of the purchases from a supplier. The level
of purchases which can be secured by letters of credit is dependent on the size
of the Company's revolving credit facility, the price of natural gas, and the
portion of the credit facility which is utilized for other purposes. The
primary use of the revolving credit facility, other than securing purchases of
natural gas as discussed above, is to provide security in the form of letters of
credit to the Company's counter-parties in various transactions involving
natural gas futures and related derivative transactions.
During the course of 1994 and through November, the Company saw its
natural gas marketing volumes increase on a regular basis. This increase was
made possible by increases in the revolving credit agreement, lower natural gas
prices, which expanded the effective capacity of the credit facility, and to
some extent expanded open credit lines from certain producers, especially in
the first half of 1994. The decline in natural gas prices, while expanding the
Company's ability to acquire natural gas supplies, increased the margin
requirements to financial instrument counter-parties and therefore caused the
Company to utilize more of its credit capacity for this purpose. As the
Company purchased more supplies from particular companies, and the amount of
that company's exposure to the Company increased, the Company's
creditworthiness came under increased scrutiny from those companies.
Throughout this time, the issue of creditworthiness for business partners
continued to be a primary focus within the industry in general. If the
acquisition of the Company by Parent is consummated, management expects that
much of the Company's problems with respect to its creditworthiness will be
alleviated based upon Parent's strong reputation in the energy services
industry, as well as its solid balance sheet. See "Item 1. Business --
Subsequent Events -- Acquisition of the Company by LG&E Energy Corp."
The Company's liquidity position is affected primarily by the timing of
receipts for natural gas sales as compared to disbursements for natural gas
purchases. Throughout 1994, the Company began to experience demands from some
suppliers for payment earlier than had been demanded in the past, thereby
placing increased demands on its liquidity.
Recognizing the increased liquidity requirements of the business, as
well as increasing credit demands, the Company began to undertake steps to
increase both its liquidity and its credit capacity. Negotiations were begun
with the Company's bank lenders for an expansion of the revolving credit
agreement and with Santa Fe for an extension of payment terms under the Gas
Contract, and the Company sought to sell United. It was believed that the sale
of
18
<PAGE> 22
United, in addition to providing some liquidity from the proceeds of the
transaction, would provide the Company with the working capital and credit
capacity that was utilized by that operation. Management believes that the
Company's liquidity problems will be alleviated in the event that the Merger is
completed.
In November 1994, Sunrise Energy Company, a natural gas marketing
company based in Dallas, filed bankruptcy. This event had an immediate effect
within the industry. The creditworthiness of independent gas marketers similar
to the Company began to come under even greater scrutiny. This situation was
exacerbated by the Company's recent payment delays to certain suppliers. In
December 1994, an industry trade publication ran an article that speculated that
the Company might merge or be acquired by another entity and that the impetus
for such a transaction was the Company's financial position. This article had a
very dramatic effect on many suppliers' perception of the Company's
creditworthiness and the willingness of those suppliers to grant open trade
credit. As a result of these events, the Company saw demands for letters of
credit increase. With the new level of letter of credit demands, the Company
has been unable to acquire sufficient supplies of natural gas to maintain
natural gas marketing volumes at levels which had been experienced through
November 1994; accordingly, volumes in December 1994 and January 1995 have been
below those seen earlier in 1994.
In December 1994, Santa Fe agreed to allow the Company to defer up to
$5,000,000 otherwise due to Santa Fe for natural gas purchases for a period of
30 days. This deferral has the effect of providing the Company with an
additional $5,000,000 of liquidity. The agreement with Santa Fe provides for
this deferral to continue through the end of June 1995 if the Merger has not
been completed before then. Effective December 31, 1994, the Company and its
bank group amended the Company's revolving credit agreement. The amended
agreement provides for total capacity of $75,000,000, subject to a borrowing
base formula, with a $15,000,000 sub-limit for direct borrowings. Previously,
the facility had provided for total capacity of $60,000,000, with $10,000,000
available for direct borrowings. The increase in the direct borrowing
sub-limit to $15,000,000 from $10,000,000 is contingent upon and is coterminous
with the $5,000,000 payment deferral arrangement with Santa Fe. As of February
28, 1995, total credit capacity under the borrowing base formula amounted to
approximately $67,000,000 of which $15,000,000 was utilized for direct
borrowings and $52,000,000 was utilized for letters of credit.
The sale of United was completed on January 31, 1995 (effective January
1, 1995). At the closing of such sale, the Company received cash of
approximately $3,000,000, a five-year note in the amount of $1,000,000, and
redeemable preferred stock of United with a liquidation preference of $900,000.
In addition, the Company expects to receive additional cash payments of
approximately $1,500,000 over a sixty day period, which amount represents the
excess of United's accounts receivable over accounts payable as of the
effective date of the sale. The sale of United had no immediate effect on the
Company's credit capacity as the contribution of United to the borrowing base
under the revolving credit agreement was approximately equal to credit capacity
utilized by United for letters of credit.
In order for the Company to return gas marketing volumes to levels seen
during 1994, it must reestablish significant open lines of trade credit, and,
to increase volumes beyond 1994 levels, even more credit capacity must be
established either in the form of open trade lines or additional capacity under
credit agreements pursuant to which letters of credit could be issued to
suppliers. While the recently expanded revolving credit agreement and adequate
financial performance may allow the Company to return volumes to 1994 levels,
management believes that the underlying financial stability required to grow
volumes beyond 1994 levels will only come from a significant restructuring and
improvement in the Company's capital structure. Management anticipates that,
as a result of the consummation of the Merger, this restructuring and
improvement in the Company's capital structure will be accomplished in the
remainder of 1995.
For the year ended December 31, 1994, cash flow, as measured by
earnings before interest, taxes, depreciation and amortization, amounted to
approximately $13,000,000, as compared to a deficit of $4,500,000 and a surplus
of $3,300,000 for the years ended December 31, 1993 and 1992, respectively.
Cash flow provided by operations amounted to approximately $3,500,000 and
$4,100,000 for the years ended December 31, 1994 and 1992, respectively. During
1993, cash flow used by operations amounted to approximately $4,200,000. Capital
expenditures for 1994 amounted to approximately $14,300,000. Of this amount,
approximately $3,000,000 relates to replacing portions of the Hobbs processing
plant that were destroyed by a fire in April, and which was covered by insurance
proceeds of approximately $3,400,000. Also included in 1994 capital
expenditures is approximately $3,450,000 related to the acquisition of
additional interests in four joint ventures, giving the Company, through its
subsidiaries, 100%
19
<PAGE> 23
ownership of the Power-Tex System plus other minor facilities. Of this amount,
$2,700,000 was financed with project debt which is recourse only to the
additional interest acquired. An additional $2,873,000 included in 1994
capital expenditures is an adjustment to the purchase price of the Company's
December 1993 acquisition of gas gathering, transmission and processing assets
from Santa Fe. This adjustment resulted from the settlement of litigation
involving the Power-Tex System and resulted in the Company assuming a liability
of $2,350,000. This liability has been financed with a ten-year, subordinated
note to Santa Fe. The note bears interest at 9%, which is payable annually,
and has no principal amortization required before maturity. The note is to be
acquired by Parent in connection with the Merger.
During 1995, the Company has no required principal reduction of its 8%
Senior Secured Notes which are held by Prudential. Mandatory principal
reductions of these notes begins in 1996 and continues through 2004. In
addition, dividends on the Company's Series A Preferred, which is held by Santa
Fe, are payable in additional shares of preferred stock through 1995 with such
dividends payable in cash thereafter. However, under terms of the 8% Senior
Secured Notes, payment of cash dividends is prohibited unless the principal
balance of the 8% Senior Secured Notes has been reduced to specific levels.
Under current circumstances, the Company does not anticipate being able to
reduce the principal balance of the 8% Senior Secured Notes to such required
levels and, therefore, does not anticipate being able to pay cash dividends on
the Series A Preferred. In connection with the Merger, Parent is to acquire
the 8% Senior Secured Notes from Prudential. Should the Merger not be
completed, management believes that the Company will be forced to seek
alternative restructurings in order to meet the terms of the 8% Senior Secured
Notes and the Series A Preferred.
At December 31, 1994, working capital was a deficit of approximately
$13,200,000 as compared to a surplus of approximately $4,100,000 at December
31, 1993. This difference relates primarily to the adjustment during 1994 of
certain assets and liabilities relating to natural gas imbalances. At December
31, 1993, these amounts were recorded as current assets and other long-term
liabilities. These adjustments had no material effect on the Company's results
of operations nor on the Company's near-term liquidity needs. In addition, at
December 31, 1993, borrowings outstanding under the Company's bank credit
agreement of $2,900,000, which were due after one year, were classified as
long-term debt, whereas, at December 31, 1994, such amounts are due within one
year and, therefore, are classified as a current liability.
RESULTS OF OPERATIONS
Discontinued Operations
The loss of approximately $8,100,000 in 1992 related primarily to
discontinued operations resulting from the adjustment of amounts expected to be
realized from certain contingent payments from the December 1991 sale of Hadson
Power Systems, Inc. and from a note received in the sale of a waste-wood
processing facility. The gain of approximately $5,600,000 in 1993 resulted
from the settlement of a contract dispute between a subsidiary of the Company
and the United States Army. See Note 3 of the Notes to the Consolidated
Financial Statements of the Company appearing elsewhere herein.
Earnings from Hadson Energy Resources Corporation ("HERC")
During 1992 and 1993, the Company recognized approximately $1,700,000
and $600,000, respectively, relating to the equity interest in earnings of its
unconsolidated affiliate, HERC. In 1993, the Company sold its interest in HERC
and recorded a gain of approximately $6,400,000. See Note 4 of the Notes to the
Consolidated Financial Statements of the Company included elsewhere herein.
Energy Products and Services
The Company's ongoing operations include natural gas purchasing,
gathering, processing, storage, transportation and marketing operations. As an
aid in understanding the Company's operating results, the following table shows
operating profit by line of business for the periods indicated. Operating
profit is defined as sales of energy products and services, less the costs of
such sales and services, which include operating expenses.
20
<PAGE> 24
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1993 1994
--------- ----- ------
(in thousands)
<S> <C> <C> <C>
Operating profit:
Natural gas marketing $ 8,895 3,245 17,712
Gas gathering, processing and transmission 6,549 4,312 8,925
NGL marketing 1,377 987 2,287
--------- ----- ------
$ 16,821 8,544 28,924
========= ===== ======
</TABLE>
Natural Gas Marketing
Average daily volumes and gross profit margins related to the marketing
of natural gas are provided below.
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1993 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Natural gas marketing:
Sales volumes (MMBtu/day) 473 508 920
Average gross margin ($/MMBtu) .052 .018 .053
</TABLE>
Sales volumes for natural gas marketing increased in 1994 as compared
to 1993 and 1992. The increase in 1994 sales volumes results primarily from the
effects of the Adobe Merger, which was completed in December 1993, and the
resulting increased access to natural gas supplies. These additional supplies
arose from (i) production purchased from Santa Fe pursuant to the Gas Contract
acquired as a part of the Adobe Merger, (ii) additional letter of credit
capacity to secure gas purchases, (iii) greater availability of open credit from
suppliers and (iv) lower prices in 1994 that allowed the Company to acquire more
units of gas with its existing credit capacity. However, as discussed above,
the Company saw its access to open credit from suppliers decline in late 1994.
Accordingly, natural gas marketing volumes in December 1994 declined to
approximately 800,000 MMBtu per day. The volumes in 1992 were negatively
impacted by the 1992 Restructuring as the Company curtailed certain business
activities during that period. In 1993, the Company began resuming normal
operations and, correspondingly, sales volumes increased. During 1993, a
decrease in gas volumes sold under "spot" contracts partially offset an increase
in volumes sold under term contracts, primarily with local distribution
companies. The Company has continued to emphasize longer term contracts and has
consistently been increasing the number of such contracts.
Since 1992, the Company and the natural gas industry in general have
experienced generally tighter margins due to competitive pressures. The
Company expects these pressures to further restrict margins beyond 1994.
Margins for natural gas sales during 1992 and 1993 were negatively affected by
certain sales to small industrial end-users. These sales were made through
Western pursuant to long-term contracts, many of which have fixed-prices which
are redetermined on a periodic (quarterly or annual) basis. During the fall
and winter of 1992 and continuing into early 1993, natural gas prices increased
dramatically, particularly in the Permian Basin and Rocky Mountain areas of the
country. As a result, the cost of acquiring gas supplies exceeded the sales
price on many of these contracts. This situation was exacerbated by the fact
that the relationship, or "basis differential," between Permian Basin and Rocky
Mountain prices and the prices reflected by natural gas futures contracts
changed from what had been experienced in the past. This caused certain of the
Company's hedging transactions related to those fixed-price contracts to be
21
<PAGE> 25
ineffective. These circumstances concerning Western resulted in a decline in
gross profit of $2,900,000 in 1992 and of approximately $3,800,000 in 1993.
During 1993, the Company renegotiated substantially all of these contracts such
that Western returned to profitable operations in the fourth quarter of 1993.
Margins from natural gas sales were also negatively affected in 1993 by
dramatic price changes which occurred in May and to a lesser extent December.
During these months, natural gas prices dropped significantly from first of the
month prices. These large price changes caused certain customers to change
supply sources from the Company during the month to take advantage of the
relatively inexpensive mid-month prices. The Company had committed for
supplies to serve these markets at the higher price levels; therefore, the
Company found itself with relatively expensive supplies which it was forced to
dispose of at a loss in some cases. Subsequent to that time, the Company has
renegotiated the pricing provisions of substantially all of these sales
contracts to provide for pricing mechanisms that reflect what has become highly
volatile intra-month pricing of natural gas. In addition, 1993 gross profits
were reduced by charges of approximately $2,300,000 related to the revaluation
of certain imbalance and transportation liabilities.
During 1994, the Company substantially increased the use of futures
contracts and swap agreements in order to hedge the price risks of natural gas
associated with firm commitments. These derivative transactions act to
minimize the risks from changes in gas prices, and, accordingly, the Company
does not believe that its profit margins would be materially affected by
changes in natural gas prices.
In August 1994, the Company entered into gas storage transactions with
forward gas purchase and sale contracts. These contracts were supplemented
with the physical purchase of natural gas, which was injected into storage and
will be sold based on the underlying forward sales contracts. The profit
margin of $502,000 was reflected as an increase to inventory and as a reduction
in cost of sales and services. The remaining amount in inventory was $136,000
at December 31, 1994.
Gas Gathering, Processing and Transmission
The Company's net share of average daily gas throughput through its
gathering and transmission facilities and average daily NGL production from its
processing plants, as well as average NGL prices, are summarized in the
following table:
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1993 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Gas gathering and transmission systems:
Throughput (MMBtu/day) 83 77 124
Processing Plants:
NGL production (Mgal/day) 107 120 139
NGL sales price ($/gal) .291 .282 .226
</TABLE>
Increases in throughput volumes for the Company's gathering and
transmission facilities relate primarily to the effect of the facilities added
pursuant to the Adobe Merger.
Volumes of NGLs produced increased in 1993 from 1992 levels due to
certain plant enhancements and modifications which were completed in the first
quarter of 1993. Beginning in 1993, significant incremental volumes of natural
gas have been purchased under reserve dedication contracts which contemplate
that such volumes will be processed by the Company and that proceeds from the
sale of extracted NGLs and processed gas will be shared between the Company and
the producer. Due to delays in adding additional processing capacity such
additional gas volumes were not being processed until late in 1993.
22
<PAGE> 26
The increase in NGL production in 1994 resulted mainly from the
processing plants acquired in the Adobe Merger. This increase was offset,
however, by the loss of production from one of the Company's processing plants
which was damaged by a fire in April 1994. The damage to the plant was fully
covered by insurance, except for a small deductible amount. The accompanying
statement of operations reflects a $1,257,000 gain that resulted from the
receipt of insurance proceeds in excess of the net book value of damaged
property plus actual and estimated expenses to be incurred by the plant during
its non-operational period. Substantially all of the proceeds were reinvested
as capital expenditures to the plant. The Company completed repairs and
resumed operations at the facility in October 1994.
NGL Marketing
Average daily volumes and gross profit margins relating to NGL
marketing are provided below.
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1993 1994
---- ----- -----
(in thousands)
<S> <C> <C> <C>
NGLs:
Sales volumes (MGal/day) 978 1,062 1,046
Margins ($/Gal) .004 .001 .005
</TABLE>
Sales volumes of NGLs remained relatively consistent during 1992, 1993
and 1994. Average gross margins on sales of NGL in 1993 decreased from 1992
primarily because of continually increasing competition, which led to
compressed margins. In the fourth quarter of 1993, the Company liquidated
certain inventory positions at losses and lowered the carrying value of its
remaining inventory at December 31, 1993 by $1,002,000 to reflect the net
realizable value of such inventory.
Selling, General and Administrative
Selling, general and administrative expenses increased slightly in
1993 as compared to 1992. This increase was due primarily to additional bad
debt expense recognized in the fourth quarter of 1993. These expenses remained
relatively stable from 1993 to 1994.
Interest Expense
Interest expense was lower for 1993 than 1992. This decrease was due
to a combination of lower debt balances and lower interest rates in 1993
compared to 1992. The lower debt balances and lower interest rates are
attributable to the 1992 Restructuring of the Company's debt and equity
capitalization which was completed in December of 1992. Interest expense for
1994 was higher than for 1993 primarily as a result of higher interest rates
associated with the debt issued pursuant to the Adobe Merger.
Other
Results for 1992 include a gain of $925,000 related to the 1992
Restructuring which represents the difference between the carrying value of the
Company's 7.75% Convertible Subordinated Debentures and the liquidation
preference of the Company's 8% Junior Cumulative Convertible Preferred Stock,
Series B, par value $.01 per share, into which it was converted, less costs and
expenses of the 1992 Restructuring.
In the fourth quarter of 1993, the Company wrote off all remaining
goodwill related to United and Western, totalling approximately $3,000,000.
Due to the recent financial results of these entities, management did not feel
that these operations continued to support such goodwill. Also in the fourth
quarter of 1993, the Company recorded a
23
<PAGE> 27
charge of approximately $2,700,000 related to the moving of its corporate
office from Oklahoma City to Dallas and the consolidation of certain other
functions, including those related to the Adobe Merger.
Depreciation and amortization expense increased in 1994 as compared to
1993 as a result of a full year of depreciation on the assets acquired in the
Adobe Merger.
No recently issued accounting standards are expected to have a
material effect on the Company's financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to Item 8 is submitted in a separate section of this
report. See the Consolidated Financial Statements and Schedules of Hadson
Corporation and Subsidiaries attached hereto and listed in Item 14 of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The Board of Directors currently consists of eight persons. Under the
Company's Restated Certificate of Incorporation, the Board of Directors is
divided into three classes. 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 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.
MEMBERS OF BOARD OF DIRECTORS - CLASS I
<TABLE>
<CAPTION>
Name and Age, Principal Occupation Director
and Other Information Since
---------------------------------- --------
<S> <C>
JAMES A. BITZER (31) has served since October 1994 as Vice President of Prudential 1993
Investment Company, which is involved in money management. From 1991 to October 1994, Mr.
Bitzer served as Second Vice President of Prudential Insurance, which is an institutional
investor and an insurance company, and from January 1993 to October 1994, as Vice President of
the Prudential Capital Group of Prudential Insurance, 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 in such
merchant banking activities. From 1987 to 1991, Mr. Bitzer held various positions with
Prudential in the investment area. Mr. Bitzer resigned from the Company's Board of Directors
effective October 11, 1994. Mr. Bitzer was considered to be a designee of Prudential pursuant
to a voting agreement entered into by Prudential and Santa Fe pursuant to the Adobe Merger (the
"Voting Agreement").
J. FRANK HAASBEEK (60) serves as President and Chief Executive Officer and a director of 1993
International Transquip Industries, Inc. (a manufacturer of air brake systems for heavy
</TABLE>
24
<PAGE> 28
<TABLE>
<S> <C>
trucks, buses and trailers), positions he has held since August 1991. From September 1990 to
August 1991, Mr. Haasbeek was Senior Vice President of GrandWest & Associates (a business
consulting firm); 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 (50) serves as Senior Vice President of Administration of Santa Fe. 1993
From September 1992 to January 1995, Mr. Rosinski served as Vice President and Chief Financial
Officer of Santa Fe. 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 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.
R. A. WALKER (38) Since January 1990, Mr. Walker has served as Vice President of 1994
Prudential Insurance and as Managing Director of the Prudential Capital Group. Mr. Walker was
elected to the Company's Board of Directors effective October 11, 1994. Mr. Walker also serves
as a director of Maxus Energy Company, an international exploration and production company.
Mr. Walker is considered to be a designee of Prudential pursuant to the Voting Agreement.
</TABLE>
MEMBERS OF BOARD OF DIRECTORS - CLASS II
<TABLE>
<CAPTION>
Name and Age, Principal Occupation Director
and Other Information Since
---------------------------------- --------
<S> <C>
GREG G. JENKINS (37) serves as President of the Company, a position he has held since 1993
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 served as Manager, Business
Development for Santa Fe from April 1989 to July 1991.
JAMES L. PAYNE (58) is Chairman of the Board, President and Chief Executive Officer of 1993
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. 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 (62) is a private investor and was employed in various capacities by 1993
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 gathers,
processes and markets natural gas. 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.
</TABLE>
25
<PAGE> 29
MEMBERS OF BOARD OF DIRECTORS - CLASS III
<TABLE>
<CAPTION>
Name and Age, Principal Occupation Director
and Other Information Since
---------------------------------- --------
<S> <C>
J. MICHAEL ADCOCK (46) currently practices law in Shawnee, Oklahoma. He served as 1981
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. Mr.
Adcock is considered to be a joint designee of Santa Fe and Prudential pursuant to the Voting
Agreement.
J.E. "BUCK" CANNON (61) has served as Chairman of the Board and as a director of the 1994
Company since March 21, 1994. Mr. Cannon was an independent energy consultant from January
1991 until March 1994. 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.
</TABLE>
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 - 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. See "Members of the Board of
Directors - Class II."
ROBERT P. CAPPS (41) 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.
KATHLEEN M. EISBRENNER (34) was elected Vice President of the Company
on November 10, 1994. From 1991 until November 1994, Ms. Eisbrenner served as
Director, Natural Gas Marketing, for the Company. Ms. Eisbrenner was Manager,
Natural Gas Marketing for the Company from 1989 to 1991.
THOMAS W. POUNDS (54) was elected Vice President, Legal Affairs and
General Counsel of the Company on July 18, 1994. From June 1, 1986 until July
15, 1994, Mr. Pounds served as Senior Vice President, General Counsel and
Secretary of American Oil and Gas Corporation, which was involved in natural
gas gathering, processing and marketing.
RICHARD N. COFFMAN (53) became employed by the Company on August 1,
1994 and was elected to the office of Controller on November 10, 1994. From
1987 to 1994, Mr. Coffman served as Vice President and Controller of GPM Gas
Corporation, a subsidiary of Phillips that gathers, processes and markets
natural gas.
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 Company Common Stock during 1994, the Company's
directors and executive officers and all
26
<PAGE> 30
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 Company Common Stock during 1994, with the exception of
Messrs. Goodell, Cannon, Haasbeek and Rosinski who each 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 Company Common Stock indicated in such table. The H/P Trust has not
made any filing under Section 16 (a) of the Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid by the Company
for the years ended December 31, 1994, December 31, 1993 and December 31, 1992
(i) to the Company's Chief Executive Officer and (ii) to each of the four most
highly compensated executive officers of the Company, other than the Company's
Chief Executive Officer, whose total annual salary and bonus for 1994 exceeded
$100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-term
Compensation
Awards
------------
Annual Compensation Securities
Name of Individual and ------------------------------------------------- Underlying All Other
Principal Positions Year Salary($) Bonus($) Other ($) Options(#) Compensation($)
----------------------------- ---- --------- -------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
J. E. Cannon 1994 112,500 - - 150,000 4,393 (1)
Chairman of the Board 1993 - - - - -
1992 - - - - -
Greg G. Jenkins 1994 170,000 13,733 (2) - 200,000 7,859 (3)
President, Chief Executive 1993 42,500 - - - -
Officer and Director 1992 - - - - -
Robert P. Capps 1994 163,800 - - 85,000 45,243 (4)
Executive Vice President, Chief 1993 163,800 35,000 (5) - - 8,584 (1)
Financial Officer and Treasurer 1992 156,000 685 198 26,667 8,338 (1)
Kathleen M. Eisbrenner (6) 1994 112,500 - - 35,000 25,780 (3)
Vice President 1993 - - - - -
1992 - - - - -
C. Jeff Goodell (7) 1994 154,791 - - 30,000 18,799 (8)
Executive Vice President - 1993 154,791 - - - 8,513 (1)
Natural Gas Liquids Operations 1992 147,420 625 864 26,667 8,114 (1)
</TABLE>
(1) Includes matching contributions to the Hadson Corporation Employee
401(k) Savings Plan (the "401(k) Plan") and life insurance premiums
paid by the Company for the benefit of employee.
(2) Mr. Jenkins received a sign-on bonus at the time of his employment by
the Company. The bonus was paid in January 1994.
(3) Includes matching contributions to the 401(k) Plan, life insurance
premiums paid by the Company for the benefit of employee and moving
expenses.
(4) Includes matching contributions to the 401(k) Plan, life insurance
premiums paid by the Company for the benefit of employee, a relocation
payment and moving expenses.
(5) In connection with the Adobe Merger, the Company paid to Mr. Capps a
cash bonus of $35,000 in recognition of his efforts on behalf of the
Company since 1991.
27
<PAGE> 31
(6) Ms. Eisbrenner was elected to the office of Vice President on November
10, 1994 after being employed by the Company since 1989. Compensation
is shown only for the year in which she was an executive officer of
the Company.
(7) Mr. Goodell resigned from the office of Executive Vice President -
Natural Gas Liquids of the Company effective December 17, 1993. Until
June 16, 1994, Mr. Goodell served as Chief Operating Officer of a
subsidiary of the Company.
(8) Includes matching contributions to the 401 (k) Plan and accrued
vacation pay.
OPTION GRANTS TABLE
The following table sets forth all stock options awarded by the Company
to the Named Executive Officers during the fiscal year ended December 31, 1994.
<TABLE>
<CAPTION>
% of Total Potential Realizable
Securities Options Exercise Value of Assumed
Underlying Granted to Price Expiration Stock Appreciation
Name Options (#) Employees ($/Sh) Date 5% 10%
------------------------ ----------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
J. E. Cannon 150,000 (1) 11.5 2.63 3/31/04 $248,099 628,731
Greg G. Jenkins 200,000 (2) 15.3 2.75 6/23/04 346,000 876,000
Robert P. Capps 85,000 (2) 6.5 2.75 6/23/04 147,050 372,300
Kathleen M. Eisbrenner 35,000 (2) 2.7 2.75 6/23/04 60,550 153,300
C. Jeff Goodell 30,000 (2) 2.3 2.75 6/23/04 51,900 131,400
</TABLE>
(1) The option was immediately exercisable upon grant as to 25% of the
total shares subject thereto. The remaining shares subject thereto
shall become exercisable in 25% increments on each of March 31, 1996,
March 31, 1997 and March 31, 1998.
(2) The option was immediately exercisable upon grant as to 25% of the
total shares subject thereto. The remaining shares subject thereto
shall become exercisable in 25% increments on each of June 23, 1996,
June 23, 1997 and June 23, 1998.
OPTIONS EXERCISED
No stock options were exercised during 1994 by any of the executive
officers named in the Summary Compensation Table set forth above.
EMPLOYMENT AGREEMENTS
In 1994, the Company entered into employment agreements with Messrs.
Cannon, Jenkins, Capps, Pounds and Coffman and Ms. Eisbrenner and amendments to
the employment agreements with Messrs. Cannon, Jenkins, Capps, Pounds and
Coffman. These agreements and amendments thereto (together, the "Employment
Agreements") provide (i) for a term of employment of two years, renewable
automatically for successive one-year periods unless either party gives notice
to the other party that no such renewal shall occur, (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 annual bonus for which the
employee would be eligible assuming 100% of the bonus had been earned for the
year in which such termination occurred if the employee's employment is
terminated by the Company in breach of such agreement or by the employee under
specified circumstances, (iii) that each agreement covering an award pursuant
to the Company 1992 Equity Incentive Plan, as amended and restated as of March
9, 1994 ("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) and (iv) that, during the 24-month period (and in the case of Mr.
Cannon and Mr. Cannon's medical and dental insurance benefits, the 36-month
period) following the date of termination, the Company shall maintain in effect
for the employee and the employee's eligible dependents life, medical and
dental insurance benefits available to the employee and the employee's eligible
dependents immediately prior to such termination. Any payments made pursuant
to the Employment Agreements are limited so
28
<PAGE> 32
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.
COMPENSATION OF DIRECTORS
During 1994, nonemployee directors (with the exception of Messrs.
Bitzer and Walker who waived all payments in accordance with the internal
policies of Prudential, their employer) received an annual fee of $20,000 each
which was paid 50% in cash and 50% in Company Common Stock, plus $1,000 for each
Board of Directors' meeting and $500 for each committee meeting. In addition,
the chairman of each committee received a stipend of $2,000 which was paid 50%
in cash and 50% in Company Common Stock. Each director who served on the
Special Committee received a fee of $15,000.
Additionally, nonemployee directors receive automatic,
non-discretionary grants of options to purchase shares of Company Common Stock
pursuant to the Equity Incentive Plan. Pursuant to such plan, at the time of
their re-election as directors, each of Messrs. Rosinski and Haasbeek received
an automatic grant of options to purchase 666 shares of Company Common Stock at
an exercise price of $2.63 per share. Mr. Bitzer, who was also re-elected in
1994, had previously waived all future grants of awards under such plan in
accordance with the internal policies of Prudential, his employer. Similarly,
Mr. Walker, who was elected to the Board of Directors in October 1994, waived
all grants of awards under the Equity Incentive Plan in accordance with the
internal policies of Prudential, his employer.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of December 31, 1994,
with respect to any person (including any "group" as that term is used in
Section 13(d)(3) of the Exchange Act), who is known to the Company to be the
beneficial owner of more than 5% of Company 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) 6,312,951 24.55%
Prudential Plaza
Newark, NJ 07102-3777
Elliot Associates, L.P. (2) 2,147,463 8.35%
712 Fifth Avenue, 36th Floor
New York, NY 10019
Santa Fe Energy Resources, Inc. (3) 10,395,665 40.43%
1616 South Voss Road, Suite 1000
Houston, TX 77057
The H/P Trust (4) 4,983,180 19.38%
c/o Liberty Bank and Trust Company of
Oklahoma City, N.A., as Trustee
P. O. Box 25848
Oklahoma City, OK 73125-9969
</TABLE>
-------------------
29
<PAGE> 33
(1) Based on information obtained by the Company from Prudential on March
2, 1995. Includes 1,329,771 shares of Company Common Stock directly
owned by Prudential and 4,983,180 shares of Company Common Stock held
by the H/P Trust over which shares Prudential has voting control and
therefore may be deemed to have beneficial ownership, but which number
may decline from time to time. See footnote (4) below.
(2) Based on Amendment No. 3 to Schedule 13D dated March 24, 1994 and
filed with the Securities and Exchange Commission (the "Commission").
Includes 1,251,576 shares of Company Common Stock which Elliot
Associates, L.P. owns directly and 895,887 shares of Company Common
Stock which Elliot Associates, L.P. has the right to acquire upon the
exercise of the shares of the Series B Preferred, which it owns.
(3) Based on Amendment No. 2 to Schedule 13D dated February 28, 1995 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
H/P 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, 1994 (other than
Company Common Stock held under the 401(k) Plan, which information is as
of November 30, 1994) with respect to the beneficial ownership of Company
Common Stock and the Series B Preferred by (i) each director of the Company,
(ii) the Named Executive Officers, and (iii) all directors and Named Executive
Officers of the Company as a group. None of such persons beneficially owns any
shares of Series A Preferred, 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) 38,678 * 1,500 *
B. M. Thompson (2) 14,667 * - *
James L. Payne (3) 11,111 * - *
Michael J. Rosinski (4) 16,333 * - *
J. Frank Haasbeek (5) 11,777 * - *
James A. Bitzer (6) - * - *
R. A. Walker (7) - * - *
J. E. Cannon (8) 37,500 * - *
Greg G. Jenkins (8) 50,000 * - *
Robert P. Capps (8) 47,917 * - *
C. Jeff Goodell (9) 42,947 * - *
Kathleen M. Eisbrenner (10) 15,547 * - *
All executive officers and
directors as a group (12) 286,477 1.1% 1,500 *
persons
</TABLE>
---------------
* Less than 1%
(1) The number of shares of Company Common Stock beneficially owned
includes: 4,850 shares owned directly; 101 shares issuable upon the
exercise of shares of Series B Preferred owned directly; 3,520 shares
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
Series B 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 Series B Preferred beneficially owned includes 101
shares held directly; and 1,399 shares held by Mr. Adcock's wife.
30
<PAGE> 34
(2) The number of shares of Company Common Stock beneficially owned
includes: 8,000 shares owned directly and 6,667 shares subject to
stock options granted under the Equity Incentive Plan.
(3) The number of shares of Company Common Stock beneficially owned
includes: 4,444 shares owned directly and 6,667 shares subject to
stock options granted under the Equity Incentive Plan.
(4) The number of shares of Company Common Stock beneficially owned
includes: 9,000 shares owned directly and 7,333 shares subject to
stock options granted under the Equity Incentive Plan.
(5) The number of shares of Company Common Stock beneficially owned
includes: 4,444 shares owned directly and 7,333 shares subject to
stock options granted under the Equity Incentive Plan.
(6) 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). Mr. Bitzer resigned from the Board of
Directors of the Company effective October 11, 1994.
(7) Mr. Walker was elected to the Board of Directors effective October 11,
1994. Mr. Walker waived all grants of awards under the Equity
Incentive Plan (in accordance with the internal policies of
Prudential, his employer).
(8) Subject to stock options granted under the Equity Incentive Plan.
(9) The number of shares of Company Common Stock beneficially owned
includes: 8,780 shares held for his account under the 401(k) Plan and
34,167 shares subject to options granted under the Equity Incentive
Plan. Mr. Goodell resigned from the office of Executive Vice
President - Natural Gas Liquids of the Company effective December 17,
1993. Mr. Goodell served as the Chief Operating Officer of a
subsidiary of the Company until June 16, 1994.
(10) The number of shares of Company Common Stock beneficially owned
includes: 151 shares held for her account under the 401(k) Plan; 52
shares held for her husband's account under the 401(k) Plan; 10,038
shares subject to options granted under the Equity Incentive Plan; and
5,306 shares subject to options granted under the Equity Incentive
Plan and held by Ms. Eisbrenner's husband.
CHANGE IN CONTROL OF THE COMPANY
The completion of the Merger will result in a change in control of the
Company. See "Item 1. Business -- Subsequent Events -- Acquisition of the
Company by LG&E Energy Corp."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GAS CONTRACT
Santa Fe and the Company (through a wholly-owned subsidiary) are
parties to the Gas Contract, which was entered into in December 1993 at the
time of the Adobe Merger. See "Item 1. Business -- Energy Products and
Services -- Natural Gas Marketing Operations." The Gas Contract provides for
the dedication by Santa Fe to the Company of all of its domestic natural gas
production from specified existing wells, which consist of essentially all of
such entity's domestic natural gas production, except to the extent such
production is dedicated under pre-existing contracts. Upon the expiration of
any such pre-existing contracts, that production shall also be dedicated to the
Company. The dedication of production will include natural gas attributable to
the interests of third parties in such wells to the extent Santa Fe, has the
right to market such production.
In addition to production from existing wells, the Gas Contract
provides for the dedication by Santa Fe to the Company of gas production from
certain domestic development wells of such entities, as defined, and
exploration wells, as defined, to the extent that Santa Fe accepts proposals
from the Company to gather and market production from such exploration wells.
Under other provisions of the Gas Contract, the Company is obligated to analyze
and provide to Santa Fe its recommendation regarding the method of gathering
and transporting production from exploration wells, whether by Santa Fe, the
Company or third parties. Production from gas wells acquired by Santa Fe,
pursuant to an acquisition of producing oil and gas properties is not dedicated
under the Gas Contract but may be dedicated by the mutual agreement of Santa Fe
and the Company.
31
<PAGE> 35
The Company is required to release gas production dedicated under the
Gas Contract under certain circumstances. In addition, the Company is required
to release specified quantities of production for use in enhanced oil recovery
operations by Santa Fe; provided, that the Company is paid a monthly handling
fee related to such production. Santa Fe 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 assurances (such as
letters of credit) for the value of such gas acceptable to Santa Fe. To date,
Santa Fe has not elected to request any such financial assurances.
Pursuant to the Gas Contract, the Company is required to pay Santa Fe,
for all production delivered, the fair market price for such gas. The Company
is obligated to use its best efforts to receive gas from Santa Fe at delivery
points so as to maximize the set price received by Santa Fe for such
production. Payment for purchases by the Company are made in immediately
available funds no later than the last working day of the month following the
month of production, and Santa Fe has the right to immediately terminate, or to
suspend performance under, the contract if any such payment is overdue by more
than three working days. On December 13, 1994, Santa Fe agreed that, with
respect to payments due on the last day of November 1994 and the last day of
each month thereafter through and including May 1995, the Company may defer up
to $5,000,000 of amounts due under the Gas Contract for 30 days; provided, that
the amounts deferred bear interest at the annual rate of the prime rate of
Texas Commerce Bank National Association plus 1% from the date of deferral
until payment. This deferral could expire earlier if the Merger is consummated
prior to April 30, 1995; however, Santa Fe has indicated that if the Merger is
not consummated prior to that time and the Merger Agreement has not been
terminated, it will extend such deferral until June 30, 1995.
The term of the Gas Contract runs until March 31, 2001. However,
either the Company or Santa Fe has the right to terminate the contract upon a
material breach of the contract or the occurrence of certain governmental
actions. In addition, Santa Fe has the right to terminate the contract upon
(i) the failure of the Company to purchase specified percentages of available
production from Santa Fe (other than as a result of force majeure), including
the failure to purchase at least 90% of available gas in any period of six
consecutive months, (ii) the occurrence of an event of default under any debt
or credit agreement of the Company for borrowed money if such event results in
the acceleration of any obligation in excess of $10,000,000 and (iii) certain
bankruptcy, insolvency and similar events.
TRUST AGREEMENT
In connection with the Adobe Merger, the Company, Prudential and the
Trustee of the H/P Trust entered into the H/P Trust Agreement, pursuant to
which the H/P Trust was created for the benefit of the Company and Prudential.
The general purpose of the H/P Trust was to provide a mechanism whereby, upon
the exercise of conversion rights by holders of shares of Series B Preferred,
the proceeds of the exercise of such conversion rights ("Conversion Proceeds')
would be paid to Prudential in place of its interest in a specified number of
shares of Company Common Stock.
The Company funded the H/P Trust with 4,983,180 shares of Company
Common Stock ("Trust Shares"), all of which were initially allocated to
Prudential's beneficial interest. Under the terms of the H/P Trust Agreement,
the Company was required to instruct the transfer agent for its Series B
Preferred to deliver the Conversion Proceeds to the Trustee of the H/P Trust.
The Conversion Proceeds were to be allocated to Prudential's beneficial
interest and remitted to Prudential on a quarterly basis (provided that an
adequate number of Series B Preferred shares had been converted during the
quarter, as determined under a formula specified in the H/P Trust Agreement).
Simultaneously, a prescribed number of Trust Shares were to be reallocated from
Prudential's beneficial interest to the Company's beneficial interest.
The H/P Trust was to terminate seven months after its creation or on
the earliest date when no shares of Series B Preferred remained outstanding,
whichever occurs later. Upon termination, Prudential was to receive all Trust
Shares that remained allocated to its beneficial interest and the Company was
to receive the balance of the Trust Shares and all other assets held in the H/P
Trust. Until termination, the trust shares were to be voted as directed by
Prudential, and Prudential was to receive any dividends or other distributions
with respect to Trust Shares allocated to its beneficial interest. The Company
was responsible for all expenses of the H/P Trust, including all costs and
compensation of the Trustee. Prudential has agreed to vote the Trust Shares in
favor of the Merger and the Merger Agreement.
32
<PAGE> 36
To date, 1,470 shares of Series B Preferred have been converted into
Company Common Stock since the creation of the H/P Trust. Accordingly, the H/P
Trust holds 4,983,180 Trust Shares and approximately $4,740 in Conversion
Proceeds. All of the Trust Shares remain allocated to Prudential's beneficial
interest because, in accordance with the terms of the H/P Trust Agreement, the
Conversion Proceeds associated with the conversion of the 1,470 shares of
Series B Preferred have not been remitted to Prudential.
As part of the Merger, the Company, Prudential and the Trustee will
consent to an amendment of the H/P Trust Agreement specifically authorizing the
assignment by Prudential of its beneficial interest in the H/P Trust, and
Prudential will assign its interest to Parent. In anticipation of the Merger,
the Company and Parent filed a request for a no-action letter or exemptive
order from the Securities and Exchange Commission to confirm that, upon
consummation of the Merger and the conversion of the Series B Preferred into
the right to receive $0.00275 per share in cash, the Company will no longer be
required to prepare and file periodic reports pursuant to the Exchange Act.
VOTING AGREEMENT
Pursuant to the Voting Agreement entered into between Santa Fe and
Prudential in connection with the Adobe Merger, each such entity agreed to vote
the shares of Company Common Stock beneficially owned by them 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. The Voting Agreement also
provides that each of Santa Fe and Prudential will vote all shares of Company
Common Stock beneficially owned by it against (i) any amendment to a provision
of the Company's bylaws relating to the filling of vacancies on the Board of
Directors and (ii) any amendment to a provision of the Company's Restated
Certificate of Incorporation, that will prohibit the amendment of such bylaw
provision unless any such amendment is approved by the holders of the Company
Common Stock. The Voting Agreement terminates upon the earlier to occur of (i)
December 14, 2003 or (ii) such time as Prudential no longer beneficially owns
at least 756,100 shares of Company Common Stock.
REGISTRATION RIGHTS AGREEMENT
In connection with the Adobe Merger, the Company entered into the
Registration Rights Agreement with Santa Fe and Prudential pursuant to which
each of Santa Fe and Prudential are entitled to certain demand and "piggyback"
registration rights with respect to the shares of capital stock of the Company
issued to it in connection with the Adobe Merger and, with respect to
Prudential, any shares of Company Common Stock received by Prudential upon the
termination of the H/P Trust.
INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE
Parent has agreed in the Merger Agreement to cause the Company to
indemnify each of the present and former officers, directors and agents of the
Company and its subsidiaries with respect to his or her service prior to the
Effective Time to the full extent permitted by the DGCL, the Company's or
subsidiaries' certificate of incorporation, bylaws or indemnification
agreements in each case as in effect as of the date of the Merger Agreement.
Additionally, Parent has agreed in the Merger Agreement to use its best efforts
to cause to be maintained for six years from the later of the Effective Time or
the expiration of the current policy, the current policies of directors' and
officers' liability insurance, with respect to all matters, including the
transactions contemplated by the Merger Agreement, occurring prior to the
Effective Time; provided, the Company, as the survivor of the Merger, may
substitute policies of at least the same coverage containing terms and
conditions which are no less advantageous to the insured so long as no lapse in
coverage occurs as a result of such substitution; and, provided further, that
effective on and after the third anniversary of the Effective Time, the Company
may substitute for the insurance policies an indemnity from Parent providing
coverage no less advantageous to the insured so long as no lapse in coverage
occurs as a result of such substitution. See "Item 1. Business -- Subsequent
Events -- Acquisition of the Company by LG&E Energy Corp."
33
<PAGE> 37
COMPANY OPTIONS
The Merger Agreement also provides that the Company shall use all
reasonable efforts to provide that, immediately prior to the Effective Time,
each outstanding option to purchase shares of Company Common Stock, each stock
appreciation right and each limited stock appreciation right or other similar
right (collectively, the "Company Options") granted under the Equity Incentive
Plan, the Nonstatutory Stock Option Agreement dated December 13, 1993 and the
Nonstatutory Stock Option Agreement dated December 14, 1993, whether or not
exercisable, shall be cancelled and holders of the Company Options shall be
entitled to receive an amount in respect thereof equal to the product of (x)
the excess, if any, of $2.75 over the respective exercise price thereof and (y)
the number of shares of the Company Common Stock subject thereto. . See "Item
1. Business -- Subsequent Events -- Acquisition of the Company by LG&E Energy
Corp."
PARENT CONTRACTS
The Company (through two of its wholly-owned subsidiaries) entered
into a Gas Purchase and Sale Contract, dated February 24, 1995 (the "Carousel
Gas Contract") and a Gas Storage Contract, dated February 24, 1995 (the
"Storage Contract") each with Carousel Holding Corporation, a wholly-owned
subsidiary of Parent ("Carousel"). Pursuant to the Carousel Gas Contract,
Carousel purchased 1,200,000 MMBtu of natural gas from the Company in February
for a price of $1.19 per MMBtu. The Carousel Gas Contract then requires
Carousel to sell to the Company 600,000 MMBtu of gas on each of August 1, 1995
and September 1, 1995 at a price of $1.38 per MMBtu. These prices are
competitive with current market prices for natural gas to be purchased and sold
at such times.
Under the terms of the Storage Contract, Carousel will store the
entire quantity of gas purchased under the Carousel Gas Contract at the
Company's storage facility from February 1995 through September 1995. The
monthly storage fee is $.005 per MMBtu of gas. However, pursuant to the terms
of the Storage Contract, the total storage fee of $42,000.00 was paid on
February 24, 1995.
The terms of the Carousel Gas Contract and Storage Contract are from
February 24, 1995 through September 30, 1995.
AGREEMENT WITH ELLIOT
The Company has entered into an agreement with Elliot Associates, L.P.
("Elliot"), which is the beneficial owner of 1,251,576 shares of Company Common
Stock and 895,887 shares of Series B Preferred. Pursuant to the terms of the
agreement, the Company has agreed to pay Elliot not more than $75,000 in
consideration for Elliot advising the Company with respect to the Merger and
for assisting the Company in obtaining any stockholder approvals required for
the Merger. . See "Item 1. Business -- Subsequent Events -- Acquisition of the
Company by LG&E Energy Corp."
34
<PAGE> 38
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS ANNUAL REPORT ON
FORM 10-K:
(1) Financial Statements: The consolidated financial statements
of the Company filed as part of this report are listed in the
"Index to Financial Statements and Financial Statement
Schedules" on Page F-1 hereof.
(2) Financial Statement Schedules: The financial statement
schedules of the Company filed as part of this report are
listed in the "Index to Financial Statements and Financial
Statement Schedules" on Page F-1 hereof.
(3) Exhibits: (Asterisk (*) indicates exhibits incorporated
herein by reference.)
*2.01 - Agreement of Merger, dated as of July 28, 1993, by
and among Santa Fe, AGPC and the Company (filed as
exhibit (c)(i) to the Company's Schedule 13E-3, File
No. 5-14102, as amended, and incorporated herein by
reference)
*2.02 - Amendment No. 1 to Agreement of Merger, dated as of
November 9, 1993, by and among Santa Fe, AGPC and the
Company (filed as exhibit (c)(iv) to the Company's
Schedule 13E-3, File No. 5-14102, as amended, and
incorporated herein by reference)
2.03 - Agreement and Plan of Merger, dated as of February
10, 1995, by and among Company, Parent and Merger Sub
*3.01 - Restated Certificate of Incorporation of the Company
(filed as exhibit 4.01 to the Company's Registration
Statement on Form S-3, File No. 33-51373, and
incorporated herein by reference)
*3.02 - Amended and Restated Bylaws of the Company (filed as
exhibit 4.2 to the Company's Registration Statement
on Form S-3, File No. 33-51373, and incorporated
herein by reference)
3.03 - Certificate of Amendment to Restated Certificate of
Incorporation of the Company dated November 21, 1994
*4.01 - Specimen certificate of the Common Stock of the
Company (filed as exhibit 4.3 to the Company's
Registration Statement on Form S-3, File No.
33-51373, and incorporated herein by reference)
*4.02 - Specimen certificate of Senior Cumulative Preferred
Stock, Series A, of the Company (filed as exhibit
4.01 to the Company's Registration Statement on Form
S-4, File No. 33-68224, and incorporated herein by
reference)
*4.03 - Specimen certificate of Junior Exercisable Preferred
Stock, Series B, of the Company (filed as exhibit
4.02 to the Company's Registration Statement on Form
S-4, File No. 33-68224, and incorporated herein by
reference)
*4.04 - Securities Purchase Agreement, dated as of December
14, 1993, between the Company and Prudential (filed
as exhibit 4.2 to the Company's Current Report on
Form 8-K dated December 14, 1993 and incorporated
herein by reference)
35
<PAGE> 39
*4.05 - Restated Securities Purchase Agreement, dated as of
December 16, 1992, by and between the Company and
Prudential (filed as Exhibit 10.1 to the Company's
Current Report on Form 8-K dated October 15, 1992 and
incorporated herein by reference)
*4.06 - Trust Agreement, dated as of December 14, 1993, among
the Company, Prudential and Liberty Bank and Trust
Company of Oklahoma City, N.A. as Trustee (filed as
exhibit 4.3 to the Company's Current Report on Form
8-K dated December 14, 1993 and incorporated herein
by reference)
*9 - Voting Agreement, dated December 14, 1993, between
Prudential and Santa Fe (filed as exhibit 9 to the
Company's Registration Statement on Form S-4, File
No. 33-68224, and incorporated herein by reference)
*10.01 - Form of Indemnity Agreement between the Company and
its directors (filed as exhibit 10.02 to the
Company's Registration Statement on Form S-2, File
No. 33-12577 and incorporated herein by reference)
*10.02 - Form of Employment Agreement, dated as of March 31,
1994, between the Company and J. E. Cannon (filed
as exhibit 10.02 to the Company's Form 10-K for the
year ended December 31, 1993 and incorporated herein
by reference)
*10.03 - Form of Employment Agreement, dated as of March 31,
1994, between the Company and Greg G. Jenkins (filed
as exhibit 10.03 to the Company's Form 10-K for the
year ended December 31, 1993 and incorporated herein
by reference)
*10.04 - Form of Amended and Restated Employment Agreement,
dated as of March 31, 1994, between the Company and
Robert P. Capps (filed as exhibit 10.07 to the
Company's Form 10-K for the year ended December 31,
1993 and incorporated herein by reference)
10.05 - Amendment to Employment Agreement, dated as of
November 10, 1994, between the Company and J. E.
Cannon.
10.06 - Amendment to Employment Agreement, dated as of
November 10, 1994, between the Company and Greg G.
Jenkins
10.07 - Amendment to Amended and Restated Employment
Agreement, dated as of November 10, 1994, between the
Company and Robert P. Capps
10.08 - Employment Agreement, dated as of July 18, 1994,
between the Company and Thomas W. Pounds
10.09 - Amendment to Employment Agreement, dated as of
November 10, 1994, between the Company and Thomas W.
Pounds
10.10 - Employment Agreement, dated as of August 1, 1994,
between the Company and Richard N. Coffman
10.11 - Amendment to Employment Agreement, dated as of
November 10, 1994, between the Company and Richard N.
Coffman
10.12 - Employment Agreement, dated as of November 10, 1994,
between the Company and Kathleen M. Eisbrenner
36
<PAGE> 40
10.13 - Indemnification Agreement, dated as of December 20,
1994, between Company and J. Michael Adcock
10.14 - Indemnification Agreement, dated as of December 20,
1994, between Company and B. M. Thompson
10.15 - Indemnification Agreement, dated as of December 20,
1994, between Company and James L. Payne
10.16 - Indemnification Agreement, dated as of December 20,
1994, between Company and Michael J. Rosinski
10.17 - Indemnification Agreement, dated as of December 20,
1994, between Company and J. Frank Haasbeek
10.18 - Indemnification Agreement, dated as of December 20,
1994, between Company and R. A. Walker
10.19 - Indemnification Agreement, dated as of December 20,
1994, between Company and J. E. Cannon
10.20 - Indemnification Agreement, dated as of December 20,
1994, between Company and Greg G. Jenkins
10.21 - Indemnity Agreement, dated as of November 10, 1988,
between Company and Robert P. Capps
10.22 - Indemnification Agreement, dated as of December 20,
1994, between Company and Kathleen M. Eisbrenner
10.23 - Indemnification Agreement, dated as of December 20,
1994, between Company and Thomas W. Pounds
10.24 - Indemnification Agreement, dated as of December 20,
1994, between Company and Richard N. Coffman
*10.25 - Hadson Corporation Employee 401(k) Savings Plan as
Amended and Restated Effective January 1, 1992 (filed
as exhibit 10.16 to the Company's Form 10-K for the
year ended December 31, 1991 and incorporated herein
by reference)
*10.26 - Credit Agreement, dated as of December 16, 1992,
among the Company and Prudential (filed as exhibit
10.2 to the Company's Current Report on Form 8-K
dated October 15, 1992 and incorporated herein by
reference)
*10.27 - Credit Agreement dated as of December 14, 1993 among
the Company, Gas Systems, United, Western and BMO,
individually and as Agent for the other Banks which
may become a party thereto (filed as exhibit 10.2 to
the Company's Current Report on Form 8-K dated
December 14, 1993 and incorporated herein by
reference)
*10.28 - Cash Collateral Agreement, dated as of July 15, 1993,
by and between the Company and Prudential (filed as
exhibit 10.21 to the Company's Registration Statement
on Form S-4, File No. 33-68224, and incorporated
herein by reference)
37
<PAGE> 41
*10.29 - Amendment No. 1 to Cash Collateral Agreement, dated
as of August 31, 1993, by and among the Company and
Prudential (filed as exhibit 10.27 to the Company's
Registration Statement on Form S-4, File No.
33-68224, and incorporated herein by reference)
*10.30 - Registration Rights Agreement dated as of December
14, 1993 among the Company, Santa Fe and Prudential
(filed as exhibit 10.2 to the Company's Current
Report on Form 8-K dated December 14, 1993 and
incorporated herein by reference)
*10.31 - Form of Hadson Corporation 1992 Equity Incentive Plan
as amended and restated as of November 5, 1993
(included as Appendix V to the Proxy Statement
Prospectus dated April 22, 1994)
*10.32 - Hadson Corporation 1992 Equity Incentive Plan, as
amended and restated as of March 9, 1994 (filed as
exhibit 10.20 to the Company's Form 10-K for the year
ended December 31, 1993 and incorporated herein by
reference)
*10.33 - Form of Master Gas Purchase Agreement dated December
14, 1993 among Santa Fe, SFEOP and AGPC (filed as
exhibit 10.23 to the Company's Registration Statement
on Form S-4, File No. 33-68224, and incorporated
herein by reference)
*10.34 - Form of Nonstatutory Stock Option Agreement dated
December 13, 1993 that was entered between the
Company with each of Harry G. Hadler, S. D. Wilks,
C.D., and Walter C. Wilson (filed as exhibit 10.28 to
the Company's Registration Statement on Form S-4,
File No. 33-68224, and incorporated herein by
reference)
*10.35 - Form of Nonstatutory Stock Option Agreement dated
December 14, 1993 that was entered into by and
between the Company and each of Messrs. Payne,
Haasbeek, Thompson and Rosinski (filed as exhibit
10.23 to the Company's Form 10-K for the year ended
December 31, 1993 and incorporated herein by
reference)
10.36 - First Amendment to Credit Agreement, dated as of
December 30, 1994, by and among the Company, Gas
Systems, United, Western and BMO, individually and as
Agent for the other Banks party to the Credit
Agreement
10.37 - Letter Agreement, dated as of December 15, 1994,
between the Company and Santa Fe amending the Gas
Contract
11 - Computation of per share earnings
22 - List of subsidiaries of the Company
23 - Consent of independent public accountants
24 - Powers of Attorney
27 - Financial Data Schedule
(B) REPORTS ON FORM 8-K.
No Reports on Form 8-K were filed during the quarter ended December 31,
1994.
(C) SEE SUBITEM (a)(3) ABOVE.
(D) SEE SUBITEM (a)(2) ABOVE.
38
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HADSON CORPORATION
DATE: March 29, 1995 By: /s/ GREG G. JENKINS
Greg G. Jenkins,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ GREG G. JENKINS President, Chief Executive March 29, 1995
Greg G. Jenkins Officer and Director
(Principal Executive Officer)
/s/ ROBERT P. CAPPS Executive Vice President, Chief March 29, 1995
Robert P. Capps Financial Officer and Treasurer
(Principal Financial Officer)
/s/ RICHARD N. COFFMAN Controller March 29, 1995
Richard N. Coffman (Principal Accounting Officer)
/s/ J. E. CANNON Chairman of the Board of Directors March 29, 1995
J. E. Cannon
/s/ J. MICHAEL ADCOCK * Director March 29, 1995
J. Michael Adcock
/s/ J. FRANK HAASBEEK * Director March 29, 1995
J. Frank Haasbeek
/s/ JAMES L. PAYNE * Director March 29, 1995
James L. Payne
</TABLE>
39
<PAGE> 43
<TABLE>
<S> <C> <C>
/s/ MICHAEL J. ROSINSKI * Director March 29, 1995
Michael J. Rosinski
/s/ B. M. THOMPSON * Director March 29, 1995
B. M. Thompson
/s/ R. A. WALKER * Director March 29, 1995
R. A. Walker
* By:/s/ ROBERT P. CAPPS
Robert P. Capps
(Attorney-in-fact for persons indicated)
</TABLE>
40
<PAGE> 44
HADSON CORPORATION AND SUBSIDIARIES
Index to Financial Statements
Page
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants . . . . . . . . . . . F-2
Consolidated Balance Sheets
December 31, 1993 and 1994 . . . . . . . . . . . . F-3
Consolidated Statements of Operations
Years Ended December 31, 1992, 1993 and 1994 . . . F-4
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1992, 1993 and 1994 . . . F-5
Consolidated Statements of Cash Flows
Years Ended December 31, 1992, 1993 and 1994 . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . F-8
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
VIII. Consolidated Valuation and Qualifying Accounts
Three Years Ended December 31, 1994 . . . . . . . F-26
</TABLE>
<PAGE> 45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Hadson Corporation
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Hadson Corporation and its subsidiaries (the "Company") at December
1993 and 1994, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the Company
and certain of its debt and equity holders entered into a definitive agreement
with LG&E Energy Corp. ("LG&E") whereby LG&E will acquire all of the Company's
common stock, senior preferred stock and certain debt.
PRICE WATERHOUSE LLP
Oklahoma City, Oklahoma
March 3, 1995
F-2
<PAGE> 46
HADSON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
December 31,
-------------------
1993 1994
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,466 3,109
Accounts receivable, net of allowance for doubtful
accounts of $888 and $1,287, respectively 85,097 76,045
Inventories 4,386 4,858
Prepaid expenses and other current assets 9,363 10,062
----------- -----------
Total current assets 101,312 94,074
----------- -----------
Property, equipment and improvements at cost, net of accumulated depreciation
and amortization of $32,135 and $36,094, respectively 99,431 101,169
Gas supply contract 6,798 5,827
Other assets 2,732 4,335
----------- -----------
$ 210,273 205,405
LIABILITIES AND SHAREHOLDERS' EQUITY =========== ===========
Current liabilities:
Bank borrowings and current long-term debt $ 1,000 10,578
Accounts payable (includes amounts from related parties
of $18,796 and $13,633, respectively) 87,504 86,944
Accrued liabilities 6,137 5,861
Deferred revenue 2,537 3,852
----------- -----------
Total current liabilities 97,178 107,235
----------- -----------
Long-term debt 55,800 57,372
Other long-term liabilities 15,123 1,579
Deferred income taxes 2,699 783
Commitments and contingencies (Note 12)
Shareholders' equity:
Preferred stock, par value $.01 per share
Authorized, 25,000,000 shares -
Senior Cumulative, Series A; issued 2,080,000 and 2,335,907
shares, at aggregate carrying value 49,000 55,029
Junior Exercisable Automatically Convertible, Series B;
issued 4,983,180 and 4,981,691 shares, at par value 50 50
Common stock, par value $.01 per share
Authorized 35,000,000 and 50,000,000 shares
issued 25,689,147 and 25,690,640 shares 257 257
Additional paid-in capital 196,625 196,621
Accumulated deficit (206,459) (213,521)
----------- -----------
Total shareholders' equity 39,473 38,436
----------- -----------
$ 210,273 205,405
============= ===========
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE> 47
HADSON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales $ 427,781 522,661 752,470
Interest and other income 478 495 311
Gain on sale of assets - 6,355 -
Gain on insurance recovery - - 1,257
Net gain on 1992 Restructuring and settlements 925 - -
Equity in earnings of unconsolidated affiliate 1,716 629 -
------------ ----------- -----------
430,900 530,140 754,038
------------ ----------- -----------
Expenses:
Cost of sales and services (includes amounts from related
parties of $948, $29,649 and $99,248, respectively) 410,960 514,117 723,546
Depreciation and amortization 6,111 6,280 10,957
Write-off of goodwill - 3,077 -
Selling, general and administrative 15,593 16,407 16,888
Interest 13,441 2,648 5,154
Write down of NGL inventory - 1,002 -
Settlement of litigation 1,000 475 -
Reorganization and other - 2,704 530
------------ ----------- -----------
447,105 546,710 757,075
------------ ----------- -----------
Loss from continuing operations before income taxes (16,205) (16,570) (3,037)
Income tax benefit (1,139) (694) (2,004)
------------ ----------- -----------
Loss from continuing operations (15,066) (15,876) (1,033)
Earnings (loss) from discontinued operations, net of income
tax benefit of $78 in 1993 (8,103) 5,553 -
------------ ----------- -----------
Net loss (23,169) (10,323) (1,033)
Preferred stock dividend requirements 61 293 5,772
------------ ----------- -----------
Net loss attributable to common stock $ (23,230) (10,616) (6,805)
Income (loss) per common and common equivalent share:
Continuing operations $ (5.35) (1.93) (.26)
Discontinued operations (2.87) .66 -
------------ ----------- -----------
Net loss $ (8.22) (1.27) (.26)
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 48
HADSON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1992, 1993 and 1994
(In Thousands)
<TABLE>
<CAPTION>
7% Senior Senior 8% Junior
Common Stock Preferred Stock Preferred Stock Preferred Stock
Common Stock Class B and C Series A Series A Series B
----------------- ----------------- ---------- ------------- ----------
Liqui-
Par Par Carrying Carrying dation
Shares Value Shares Value Shares Value Shares Value Shares Value
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 2,517 3,776 - - - - - - - -
Issuance of common stock 68 102 - - - - - - - -
Adjust par value to $.01 - (3,490) - - - - - - - -
Restructuring of debt and equity - -
capitalization 20 3 84,045 840 49 42,543 - - 4,065 20,325
Net loss for the year ended - -
December 31, 1992 - - - - - - - - - -
--- --- ---- ---- ---- ---- ---- --- --- ---
Balance at December 31, 1992 2,605 391 84,045 840 49 42,543 - - 4,065 20,325
Issuance of common stock 13 2 - - - - - - - -
Issuance of 8% Junior
Preferred stock - - - - - - - - 30 150
Conversion of 8% Junior Preferred
stock 659 99 - - - - - - (455) (2,273)
Dividend on 8% Junior Preferred
stock - - - - - - - - 156 781
Issuance of stock pursuant
to Merger 10,396 104 - - - - 2,080 49,000 - -
Issuance and conversion of stock
pursuant to recapitalization 12,016 (339) (84,045) (840) (49) (42,543) - - (3,796) (18,983)
Net loss for the year ended - -
December 31, 1993 - - - - - - - - - -
--- --- ---- ---- ---- ---- --- --- ---- ----
Balance at December 31, 1993 25,689 257 - - - - 2,080 49,000 - -
Conversion of Junior Preferred
stock 1 - - - - - - - -
Dividend on Senior Preferred
stock - - - - - - 256 6,029 - -
Issuance of cash for partial
shares - - - - - - - - - -
Net loss for the year ended - -
December 31, 1994 - - - - - - - - - -
--- --- ---- ---- ---- ---- ---- ---- ---- ----
Balance at December 31, 1994 25,690 257 - - - - 2,336 55,029 - -
====== ======= ==== ==== ==== ==== ======= ======= ==== ====
</TABLE>
<TABLE>
<CAPTION>
Junior
Preferred Stock
Series B
----------
Additional Accumu- Total
Par Paid-in lated Shareholders'
Shares Value Capital Deficit Equity
------ ------ ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 - - 146,057 (172,186) (22,353)
Issuance of common stock - - 790 - 892
Adjust par value to $.01 - - 3,490 - -
Restructuring of debt and equity
capitalization - - - - 63,711
Net loss for the year ended
December 31, 1992 - - - (23,169) (23,169)
---- --- ---- ------- -------
Balance at December 31, 1992 - - 150,337 (195,355) 19,081
Issuance of common stock - - - - 2
Issuance of 8% Junior
Preferred stock - - - - 150
Conversion of 8% Junior Preferred
stock - - 2,174 - -
Dividend on 8% Junior Preferred
stock - - - (781) -
Issuance of stock pursuant
to Merger - - 16,292 - 65,396
Issuance and conversion of stock
pursuant to recapitalization 4,983 50 27,822 - (34,833)
Net loss for the year ended
December 31, 1993 - - - (10,323) (10,323)
---- --- ---- ------- -------
Balance at December 31, 1993 4,983 50 196,625 (206,459) 39,473
Conversion of Junior Preferred
stock (1) - - - -
Dividend on Senior Preferred
stock - - - (6,029) -
Issuance of cash for partial
shares - - (4) - (4)
Net loss for the year ended
December 31, 1994 - - - (1,033) (1,033)
---- ---- --- ------- -------
Balance at December 31, 1994 4,982 50 196,621 (213,521) 38,436
====== === ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 49
HADSON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $ (15,066) (15,876) (1,033)
Items not affecting cash flow:
Depreciation and amortization 6,111 6,280 10,957
Gain on insurance recovery - - (1,257)
Deferred income taxes (338) (609) (2,086)
Gain on sale of assets - (6,355) -
Write-off of goodwill - 3,077 -
Write down of NGL inventory - 1,002 -
Reorganization costs - 1,372 -
Net gain on 1992 Restructuring and settlements (925) - -
Interest settled in 1992 Restructuring 12,941 -
Equity in (earnings) loss of unconsolidated
affiliate and other (1,282) 2,203 738
Accruals of operating cash receipts and payments, net of
effects of acquired or sold companies:
Change in trade receivables 5,392 (24,371) (10,133)
Change in inventories 7,659 (2,231) (4,733)
Change in prepaid expenses and other current assets (956) (6,056) 468
Change in current liabilities (includes amounts from related
parties of $-0-, $18,796 and ($5,163), respectively) (9,415) 37,332 10,562
---------- ---------- ----------
Cash flows provided (used) by operating activities 4,121 (4,232) 3,483
---------- ---------- ----------
Cash flows from investing activities:
Additions to property, equipment and improvements (3,384) (4,482) (14,268)
Dispositions of properties 257 261 3,123
Proceeds from insurance recovery - - 3,403
Net proceeds from sale of equity investments - 44,000 750
Cash proceeds (requirements) related to discontinued
operations (3,548) 7,339 -
Other (276) 143 (570)
---------- ---------- ----------
Cash flows provided (used) by investing activities (6,951) 47,261 (7,562)
---------- ---------- ----------
</TABLE>
F-6
<PAGE> 50
HADSON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1992 1993 1994
---- ---- -----
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from borrowings $ 7,970 200 9,800
Net repayments of borrowings (1,000) (39,774) (1,000)
Transaction costs related to restructurings (4,491) (4,434) (4,078)
Loan origination and amendment fees (537) - -
Issuance of common stock 892 - -
----------- ----------- -----------
Cash flows provided (used) by financing activities 2,834 (44,008) 4,722
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents $ 4 (979) 643
Cash and cash equivalents at beginning of period 3,441 3,445 2,466
----------- ----------- -----------
Cash and cash equivalents at end of period $ 3,445 2,466 3,109
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest (net of amounts capitalized) $ 830 2,975 3,833
Income taxes (net of refunds) (2) 102 (185)
----------- ----------- -----------
$ 828 3,077 3,648
=========== =========== ===========
Supplemental disclosures of non-cash activities:
Issuance of 6.2% Senior Secured Notes $ 56,400 33,000 -
Issuance of Santa Fe 9% subordinated note - - 2,350
Retirement of debt in 1992 Restructuring:
Convertible Subordinated Debentures (27,528) -
11.2% Senior Notes (13,973) - -
12.9% Senior Subordinated Notes (75,000) - -
Issuance (Retirement) of 7% Senior Preferred Stock 42,543 (42,543) -
Issuance (Retirement) of 8% Junior Preferred Stock 20,325 (20,325) -
Issuance (Retirement) of Class B and C Common Stock 843 (843) -
Additions to property, equipment and improvements - 65,000 2,520
Issuance of Senior Preferred Stock - 49,000 6,029
Issuance of Common Stock 46,154 -
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 51
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Hadson Corporation (the "Company") and its subsidiaries are engaged in
the purchasing, gathering, processing, storing, transporting and marketing of
natural gas and natural gas liquids ("NGL").
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned and majority- owned subsidiaries. Material
intercompany balances and transactions have been eliminated. The Company's
proportionate share of assets, liabilities, revenues and expenses of various
energy related partnerships and joint ventures is included in the consolidated
financial statements in accordance with industry practice.
Business Segment Information
The Company's operations consist of only one segment; therefore, no
segment information is presented for the three years ending December 31, 1994.
During 1992, 1993 and 1994, no one customer accounted for more than 10% of
total revenues from operations.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and funds
invested in highly liquid instruments which are available on short notice,
generally overnight, and with original maturities of three months or less.
Concentration of Credit Risk
The Company's accounts receivable relate primarily to sales of energy
products and services in the United States to end-user and utility markets.
Receivables which are considered a credit risk are backed by letters of credit.
Credit terms, typical of industry standards, are of a short-term nature.
Natural Gas Imbalances
In the course of buying and selling natural gas, the Company may
receive or deliver volumes that are different than the amount nominated. Such
variances arise due to the nature of the gas commodity and the industry itself.
These transactions result in volumetric receivable and payable balances which
are recovered or repaid through the receipt or delivery of gas in the future,
or settled in cash. Natural gas imbalances are valued at the market price at
the time the imbalance was created with valuation adjustments provided for any
lower net realizable values. Natural gas imbalances expected to be settled
within one year are classified as current assets or current liabilities, with
the remaining net imbalance position reflected in other long-term liabilities
on the accompanying consolidated balance sheets.
F-8
<PAGE> 52
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Amounts classified as inventories consist of natural gas contained in
a gas storage facility that is expected to be withdrawn and sold within one
year, NGL held in storage facilities, natural gas imbalances due from others
that result from the current year's transactions, and NGL exchange balances.
Generally, gas held in storage and NGL are valued as of year end at the lower
of net realizable value or cost on an average cost basis. Gas held in storage
that is supported by speculative futures, swaps or options is valued at the
underlying forward sales contracts. There were no required mark-to-market
adjustments at December 31, 1993, and the amount of such mark-to-market
adjustments that remained in inventory at December 31, 1994 was immaterial.
The accompanying statements of operations for each of the three years ended
December 31, 1992, 1993 and 1994, reflect adjustments to NGL inventory to
estimated realizable values of $-0-, $1,000,000 and $-0-, respectively.
The major classes of inventory at December 31, 1993 and 1994 are as
follows:
<TABLE>
<CAPTION>
December 31,
---------------------
1993 1994
---- ----
(In Thousands)
<S> <C> <C>
Inventory:
Natural gas in storage $ 260 779
NGL 1,442 -
Exchange balances:
NGL (29) -
Natural gas imbalances 2,713 4,079
-------------- ----------
$ 4,386 4,858
============== ==========
</TABLE>
Derivative Transactions
The Company enters into hedging activities including futures contracts
and swap agreements primarily for the purpose of hedging price risks of natural
gas associated with certain firm purchase and sales commitments. Gains and
losses on hedges of existing assets or liabilities are included in the carrying
amounts of those assets or liabilities and are ultimately recognized in income
as part of those carrying amounts. Gains and losses related to qualifying
hedges of firm commitments or anticipated transactions are also deferred and
are recognized in income or as adjustments of carrying amounts when the hedged
transaction occurs. The amounts of any speculative futures gains and losses
are immaterial in the periods presented in the accompanying consolidated
statements of operations.
Property, Equipment and Improvements
Natural gas gathering and transportation facilities are depreciated
using the straight-line method over the expected life of the underlying natural
gas reserves, which range from three to 20 years. Depreciation of other
property and equipment is provided using the straight-line method over
estimated useful lives of three to 10 years. Interest costs capitalized for
each of the years ended December 31, 1992, 1993 and 1994 were $278,000,
$320,000 and $180,000, respectively.
F-9
<PAGE> 53
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible Assets
The gas supply contract acquired pursuant to the December 14, 1993
merger of Adobe Gas Pipeline Company ("AGPC") with and into the Company (the
"Merger") is being amortized on a straight-line basis over its seven-year term
(see Note 2).
Stock Options
No accounting is made with respect to stock options until they are
exercised as all options have been granted at a price equal to or greater than
fair value at date of grant. Upon exercise, the excess of the proceeds over
the par value of the shares issued is credited to additional paid-in capital.
Income Taxes
The Company has provided deferred taxes for the difference in the tax
and financial reporting bases of assets and liabilities in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes. Investment and energy tax credits, when available, are accounted
for under the flow-through method.
Net Earnings Per Common Share
For each of the three years ended December 31, 1992, 1993 and 1994,
net loss per common share was based upon the weighted average shares of common
stock outstanding of 2,826,000, 8,383,000 and 25,690,000, respectively, as the
inclusion of any common stock equivalents would be anti-dilutive. The weighted
average shares of Common Stock are computed after giving effect to the
approximate one-for-15 reverse split (the "Reverse Stock Split") of the Common
Stock effected by the Merger in December 1993 and described in Note 2. Fully
diluted earnings per common share assume the conversion of convertible debt
securities and common stock equivalents which would arise from the exercise of
stock options, unless such items would be anti-dilutive. As of December 31,
1994, there were 25,690,640 shares of Common Stock outstanding.
Basis of Presentation
Certain reclassifications have been made in the consolidated financial
statements for the years ended December 31, 1992 and 1993 to conform to the
presentation used for the December 31, 1994 financial statements.
(2) MERGER AND RECAPITALIZATION OF DEBT AND EQUITY
In December 1992, the Company's then-existing debt and equity
capitalization was restructured (the "1992 Restructuring") pursuant to a
"prepackaged" plan of reorganization filed by the Company in connection with
its October 1992 filing of a voluntary proceeding for reorganization under
Chapter 11 of the United States Bankruptcy Code. The Company recognized a net
gain on the 1992 Restructuring of $925,000.
The Merger was consummated on December 14, 1993. Prior to the Merger,
AGPC was an indirect wholly owned subsidiary of Santa Fe Energy Resources, Inc.
("Santa Fe") and engaged, through its wholly owned subsidiaries, in the
gathering, processing, transmission and marketing of natural gas, with
interests in 10 natural gas pipeline systems located in Texas, New Mexico,
Oklahoma and Montana (of which six were operated by AGPC) and three natural gas
processing plants (collectively, and including the various contracts
associated with such facilities, the "AGPC Assets").
F-10
<PAGE> 54
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(2) MERGER AND RECAPITALIZATION OF DEBT AND EQUITY (Continued)
In addition to effecting the acquisition by the Company of AGPC, the Merger
also effected a restructuring of the Company's debt and equity capitalization
(including the Reverse Stock Split).
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, 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. Effective December 31, 1994, SFEOP was
merged with and into Santa Fe. 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.
Pursuant to the Merger, the Company issued to Santa Fe, in exchange
for the stock of AGPC, 2,080,000 shares of Senior Cumulative Preferred Stock,
Series A, ("Senior Preferred Stock") having an aggregate liquidation preference
of $52,000,000 and 10,395,665 shares of post reverse-split Common Stock
representing approximately 40% of the total number of shares of Common Stock
outstanding immediately after the Merger.
The combination of AGPC and its subsidiaries and the Company has been
accounted for using the purchase method of accounting. The value of the net
assets acquired by the Company in the Merger was more readily determinable than
the value of the total consideration issued by the Company and, therefore, net
assets were used in determining the fair value of such consideration. The
value of the AGPC Assets was determined primarily based on a multiple of
expected cash flow from those assets. The value of the Gas Contract was
determined by evaluating estimated savings in gas purchase costs over
historical gas purchase costs expected to be afforded the Company over the term
of the Gas Contract discounted to net present value at 12%. The value of the
Senior Preferred Stock was determined based on the yield of the Senior
Preferred Stock as compared to the yield of other securities deemed to be
comparable. A summary of the purchase price and consideration follows:
<TABLE>
<CAPTION>
(In Thousands)
---------------
<S> <C>
Determination of purchase price:
AGPC Assets $ 67,873
Gas Contract 6,798
Deferred tax liability (2,957)
Current liabilities (598)
Long-term liabilities (3,837)
---------------
$ 67,279
Consideration: ===============
Senior Preferred Stock $ 49,000
Common Stock 16,396
Costs of acquisition of AGPC Assets and Gas Contract 1,883
---------------
$ 67,279
===============
</TABLE>
Components of the restructuring of the Company's debt and equity
recapitalization which were effected by the Merger are described below.
Transaction costs associated with the recapitalization were approximately
$1,800,000.
All of the shares of the Company's Class B Common Stock, Class C
Common Stock, 7% Senior Cumulative Preferred Stock, Series A ("Old Senior
Preferred Stock"), all of which were held by The Prudential Insurance Company
of America and certain of its affiliates (collectively, "Prudential"), and
$23,400,000 in 6.2% Senior Secured Notes Due
F-11
<PAGE> 55
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(2) MERGER AND RECAPITALIZATION OF DEBT AND EQUITY (Continued)
2000 ("Old Senior Secured Notes") due to Prudential were exchanged for or
converted, pursuant to the Merger, into, in the aggregate, $56,400,000 of 8%
Senior Secured Notes due 2003 ("New Senior Secured Notes"), 1,309,762 shares of
Common Stock, and the "P Interest" in a trust formed in connection with the
Merger (the "H/P Trust") (see Note 6), which interest represented a beneficial
trust interest in 4,983,180 shares of Common Stock which were deposited by the
Company to the H/P Trust (the "Trust Shares") and could result in the payment
to Prudential of an amount equal to the amount of all proceeds payable upon the
exercise of New Junior Exercisable Automatically Convertible Preferred Stock,
Series B ("New Junior Preferred Stock") (See Note 6). Such amount could total
approximately $16,000,000. The shares of Common Stock issued to the H/P Trust
are treated as outstanding by the Company.
The 3,796,814 shares of 8% Junior Cumulative Convertible Preferred
Stock, Series B ("Old Junior Preferred Stock") outstanding at the time of the
Merger were converted into 5,723,052 shares of Common Stock and 4,163,852
shares of New Junior Preferred Stock.
To effect the Reverse Stock Split, the 49,159,867 shares of common
stock outstanding at the time of the Merger were converted into 3,277,488
shares of Common Stock and 819,328 shares of New Junior Preferred Stock.
The following represents the unaudited pro forma results of operations
as if the sale of the common stock of Hadson Energy Resources Corporation
("HERC") (see Note 4) and the Merger and the recapitalization of debt and
equity had occurred on January 1, 1993:
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------
1993
---------------
(In Thousands,
except per share
data)
<S> <C>
Net sales $ 700,254
Loss from continuing operations (18,939)
Loss attributable to common stock (24,789)
Loss per share from continuing operations (.96)
</TABLE>
The pro forma financial information does not purport to be indicative
of the results of operations that would have occurred had the transactions
taken place at the beginning of the period presented or of future results of
operations.
On February 10, 1995, the Company and its two largest debt and equity
holders, Santa Fe and Prudential, executed definitive agreements with LG&E
Energy Corp. ("LG&E Energy") of Louisville, Kentucky, whereby LG&E Energy will
acquire all of the Company's Common Stock, Senior Preferred Stock, New Senior
Secured Notes, and Santa Fe 9% subordinated note for an aggregate consideration
of $143,000,000. Pursuant to the agreements, the Company's public shareholders
will receive $2.75 in cash for each share of the Company's Common Stock. The
completion of these transactions, which is subject to certain regulatory
filings and approvals, the vote of the Company's shareholders as well as
certain other conditions, is expected in the second quarter of 1995. Santa Fe
and Prudential, who combined have voting control of approximately 65% of the
Company's Common Stock, have agreed to vote their common shares in favor of the
transactions, which will result in the Company becoming a wholly owned
subsidiary of LG&E Energy.
F-12
<PAGE> 56
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(3) DISCONTINUED OPERATIONS
The power systems group ("Power Systems"), excluding certain assets,
was sold in December 1991. The proceeds from the transaction were subject to
certain adjustments and had additional amounts payable under certain
circumstances. The adjustments to proceeds included a purchase price
adjustment; the amount of which was the subject of a dispute between the
Company and the purchaser.
Of the $50,500,000 purchase price, the purchaser retained $2,500,000
as a "hold-back" to secure certain of the Company's indemnification obligations
related to the sale. In 1992, the Company and the purchaser reached agreement
regarding the settlement of certain matters relating to this sale, including
the purchase price adjustment, certain indemnity claims and the manner and time
period for resolving other indemnity claims. Pursuant to such settlement
agreement, the purchaser paid the Company $400,000 and continues to hold
$2,200,000 as security for certain indemnity claims that may arise. The
purchaser has also agreed that other indemnity claims against the Company
cannot exceed $500,000. If, however, within the time limits set forth in the
settlement agreement, the claims are less than the $2,200,000 held by the
purchaser, then the balance of the hold-back will be returned to the Company.
In connection with the settlement agreement, the Company charged $4,200,000 to
loss on discontinued operations in 1992 as the Company believed that it was
unlikely to receive any significant additional amounts.
The assets of Power Systems retained by the Company after the 1991
sale related to subsidiaries of the Company having investments in joint
ventures which own six cogeneration projects and one waste-wood processing
facility. In 1992, the Company disposed of four of its subsidiaries having
investments in cogeneration projects and the one having the investment in the
waste-wood processing facility. The Company recognized a loss of $3,900,000 in
connection with these dispositions.
In September 1993, the Company reached a settlement with the United
States Army regarding various claims relating to a contract between a defense
subsidiary of the Company and the Army. As a part of this settlement, the Army
released to the Company amounts due to the subsidiary pursuant to certain other
government contracts which totalled approximately $1,800,000 and made a cash
payment to the Company of $7,000,000. After payment of litigation costs of
approximately $1,700,000, the net cash proceeds to the Company from this
settlement were approximately $7,100,000. Of the proceeds, $1,500,000 was
applied as a principal prepayment of the New Senior Secured Notes issued
pursuant to the Merger, and the rest was retained by the Company to pay
transaction costs related to the Merger and related transactions and for
general corporate purposes. The accompanying consolidated statement of
operations for the year ended December 31, 1993 reflects a gain of $5,600,000
related to the settlement.
(4) SALE OF ASSETS
In July 1993, the Company completed the sale of its approximate 49%
interest in the outstanding common stock of HERC. The equity method was
utilized in accounting for the investment.
Total proceeds from the sale of $45,000,000 were applied as follows:
(i) $33,000,000 principal prepayment of the Company's Old Senior Secured Notes,
(ii) approximately $1,300,000 to pay accrued interest on the Old Senior Secured
Notes and fees due Prudential, (iii) approximately $2,200,000 in repayment of
all borrowings and accrued interest under an interim financing facility with
Prudential described in Note 5, (iv) $1,000,000 in repayment of the New Senior
Secured Notes, and (v) the remainder was retained by the Company for costs and
expenses related to the sale and other corporate purposes. A gain of
approximately $6,400,000 was recognized on the sale.
F-13
<PAGE> 57
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(4) SALE OF ASSETS (Continued)
In February 1994, the Company assigned a 30% interest in a gathering
system and processing plant to a joint owner in return for (i) the dedication
of additional production to the system, (ii) the assignment of a gathering
system in New Mexico along with its dedicated production, and (iii) $2,500,000
in cash. Due to the recent valuation of the gathering system and processing
plant in the Merger, no gain or loss was recognized on the sale. The
accompanying consolidated balance sheet includes $2,500,000 in current assets
at December 31, 1993, related to the assets that were sold.
In November 1994, the Company sold its 40% interest in Beck & Root
Fuel Company ("Beck & Root") in exchange for $750,000 in cash and $1,250,000 in
Independent Gas Company Holdings, Inc., Series B Cumulative Redeemable
Convertible Preferred Stock. The loss on the sale of the Company's interest
was not material. The accompanying consolidated balance sheet includes
$1,250,000 in other assets at December 31, 1994, related to the preferred stock
held by the Company.
Effective January 1, 1995, the Company sold its United LP Gas
Corporation ("United") subsidiary for a total sales price of $3,100,000 that
consisted of a $1,200,000 cash payment, a $1,000,000 note receivable, and
$900,000 in preferred stock of the acquiring company. In addition to the
$3,100,000 sales price, the Company will receive additional proceeds of
$3,435,000 that represent the excess of United's current assets over current
liabilities at December 31, 1994. At the January 31, 1995 closing, the Company
received $1,889,000 relating to these net assets in addition to the $1,200,000
sales proceeds payment. The sale resulted in a loss of $205,000 that was
recognized in the Company's results of operations for the year ended December
31, 1994. The accompanying consolidated balance sheet includes $4,635,000 in
current assets and $1,900,000 in noncurrent assets at December 31, 1994,
related to the assets that were sold and the net assets and liabilities that
will be remitted to the Company as collected. United contributed approximately
$120,069,000, $129,454,000 and $117,448,000 to consolidated revenue for each of
the years ended December 31, 1992, 1993 and 1994, respectively. Pre-tax income
or loss for each of these years was not material.
(5) LONG-TERM DEBT AND BANK BORROWINGS
<TABLE>
<CAPTION>
December 31,
----------------------
1993 1994
---- ----
(In Thousands)
<S> <C> <C>
8% senior secured notes, due 2001 (A) $ 53,900 52,900
Bank Credit Agreement (B) 2,900 10,000
Limited Recourse Credit Agreement (C) - 2,700
Santa Fe 9% subordinated note,
due 2004 (D) - 2,350
-------------- -------------
56,800 67,950
Current portion (1,000) (10,578)
-------------- -------------
$ 55,800 57,372
============== =============
</TABLE>
(A) In December 1993, in connection with the debt and equity
recapitalization effected by the Merger, the Company entered into a
Securities Purchase Agreement (the "Securities Purchase Agreement")
with Prudential. See Note 2. The agreement provided that all
outstanding Old Senior Secured Notes be cancelled. Pursuant to the
Securities Purchase Agreement, the Company issued $56,400,000 of New
Senior Secured Notes. Upon completion of the Merger, the Company paid
$2,500,000 to Prudential in partial repayment of the notes.
F-14
<PAGE> 58
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) LONG-TERM DEBT AND BANK BORROWINGS (Continued)
The New Senior Secured Notes bear interest at the rate of 8%
per annum and mature on December 31, 2003. Such notes are prepayable
in whole or in part (in minimum increments of $500,000) without
premium or penalty. Remaining required principal prepayments are as
follows: (i) $2,500,000 by December 31, 1996, (ii) an additional
$5,900,000 by December 31, 1997, and (iii) an additional $8,000,000 by
December 31 of each year thereafter through 2002 with a final payment
of $4,500,000 due by December 31, 2003. The Company is also required
to prepay the New Senior Secured Notes in an amount equal to proceeds
of asset sales over certain amounts. The New Senior Secured Notes are
secured by the first priority lien on all the stock of certain of the
Company's subsidiaries and on the accounts receivable and other
personal property of the Company (but not of its operating
subsidiaries). Such lien has been granted to a collateral agent for
the benefit of Prudential and Bank of Montreal ("BMO"), as more fully
discussed below.
The Securities Purchase Agreement restricts the payment of
dividends, including the payment of dividends on the Senior Preferred
Stock (other than those dividends payable in additional shares of
Senior Preferred Stock). In addition, the outstanding principal
balance of the New Senior Secured Notes must be reduced to certain
specified levels before any cash dividends may be paid on the Senior
Preferred Stock. See Note 6. Other provisions of the Securities
Purchase Agreement include restrictions on the incurrence of
additional debt, the creation of liens, investments, issuance of
capital stock by subsidiaries and dispositions of assets and
subsidiaries.
(B) Upon consummation of the Merger, the Company entered into a
new credit agreement with a group of banks ("Bank Credit Agreement")
which replaced its existing bank credit agreement. The Company and
certain of its marketing subsidiaries are obligors under the Bank
Credit Agreement.
As of December 31, 1994, the Bank Credit Agreement was amended
to provide for total credit of $75,000,000 primarily to support trade
obligations, all on a revolving basis and subject to availability
under a "borrowing base" formula. Of the total $75,000,000 facility,
the total amount is available for letters of credit while borrowings
are subject to a $15,000,000 sub-limit. Under the facility, the
borrowing base at any time will be equal to the sum of approximately
80% of the aggregate dollar amount of eligible accounts receivable of
certain of the Company's subsidiaries in which the banks have a
security interest plus the full amount of the Company's cash and
certain short-term investments in which the banks have a security
interest. At February 28, 1995, the borrowing base, and therefore
total credit available under the facility amounted to $67,045,000.
Borrowings outstanding under the Bank Credit Agreement bear
interest, payable quarterly, at the base rate announced from time to
time by the Banks plus 1% per annum. At December 31, 1994, this rate
was 9.5%. In addition, the Company is required to pay a letter of
credit fee of 1.875% per annum, payable quarterly, on the amount of
any outstanding letters of credit, a commitment fee of .5% per annum,
payable quarterly, on the unused portion of the facility and a
facility fee of .125% per annum, payable quarterly, on the maximum
amount of the facility. In addition, during each of the four quarters
of 1994, the Company was required to reduce the outstanding amount of
borrowings under the facility to no more than $5,000,000 and, during
each fiscal quarter thereafter, the Company is required to reduce such
borrowings to zero, in each case for not less than 10 consecutive
business days. Also, the Company is required to reduce the
outstanding amount of borrowings to $10,000,000 for not less than
five consecutive business days during each month beginning in
January 1995. Amounts outstanding under the facility will be due and
payable upon the termination of the facility on December 14, 1995,
provided that the facility may be extended for an additional year by
the mutual consent of the Company and all of the Banks then parties to
such facility, subject to the payment of a fee and certain customary
conditions.
F-15
<PAGE> 59
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) LONG-TERM DEBT AND BANK BORROWINGS (Continued)
During 1994, the average amount of borrowings outstanding
under the Bank Credit Agreement was $9,119,000. At December 31, 1994,
letters of credit amounting to $54,635,000 were outstanding under the
Bank Credit Agreement. Of this amount, $40,473,000 relates to standby
letters of credit which support trade accounts payable included in the
accompanying December 31, 1994 consolidated balance sheet.
The Company's obligations under the Bank Credit Agreement are
secured by a first priority lien, granted in favor of a collateral
agent for the benefit of the banks and Prudential, on the outstanding
capital stock of certain of the Company's subsidiaries, on the
accounts receivable and other personal property of the Company and on
certain other miscellaneous collateral, and by a first priority lien
granted in favor of the banks on the accounts receivable and other
personal property of the Company's subsidiaries that are obligors
under the Bank Credit Agreement. Pursuant to certain intercreditor
arrangements entered into by the banks and Prudential, the proceeds of
any sale by the collateral agent, following an event of default of any
collateral that is subject to such intercreditor arrangements, will be
applied first to the payment of amounts due under the Bank Credit
Agreement and second to payment of the New Senior Secured Notes.
Debt issuance costs are included in current assets on the
accompanying consolidated balance sheets and are amortized on a
straight-line basis over the term of the Bank Credit Agreement. The
Bank Credit Agreement contains restrictions on, among other things,
the incurrence of additional debt, payments of dividends, investments,
issuance of capital stock by subsidiaries, and dispositions of assets
and subsidiaries. In addition, it calls for the Company to maintain
minimum levels of working capital, liquidity and net worth.
(C) In November 1994, a subsidiary of the Company entered into an
agreement to purchase additional interests in existing natural gas
production facilities. This purchase was funded by a term credit
agreement with a bank. Borrowings under the facility are recourse
only to the assets acquired with the proceeds.
Borrowings under the agreement amounted to $2,700,000 and bear
interest, payable monthly, at prime plus 1.75%. At December 31, 1994,
this rate was 10.25%. Principal payments are required at the end of
each month beginning December 31, 1994, in the amount of $37,500. In
addition, beginning with the quarter ending March 31, 1995, and
continuing until the end of the term of the agreement in November
1999, the subsidiary is required to pay quarterly, as a prepayment of
principal, an amount equal to 100% of the excess cash flow of the
purchased facilities as defined in the agreement. Such payments may
not exceed a quarterly payment threshold initially set at $22,500, and
in the event that the excess cash flow is less than the quarterly
payment threshold, the shortfall will be added to subsequent quarters'
quarterly payment threshold until such time as all shortfalls are
paid. Obligations under the agreement are secured by a financing
statement covering the acquired interests in the facilities.
(D) In November 1994, certain of the Company's subsidiaries and
Santa Fe settled a lawsuit with third parties. See Note 12. Santa Fe
funded the Company's $2,350,000 share of the settlement with a
10-year, 9% fixed rate balloon note with interest payable annually.
This note is subordinate to the Company's other lenders. The
settlement was accounted for as an adjustment to the price of the AGPC
Assets purchased from Santa Fe.
F-16
<PAGE> 60
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) LONG-TERM DEBT AND BANK BORROWINGS (Continued)
As of December 31, 1993, annual maturities of long-term debt and bank
borrowings for each of the next five years are as follows:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
1995 $ 10,578
1996 3,040
1997 6,440
1998 8,540
1999 8,502
Thereafter 30,850
------------
$ 67,950
============
</TABLE>
(6) CAPITAL STOCK
Senior Cumulative Preferred Stock, Series A ("Senior Preferred Stock")
On December 14, 1993, 2,080,000 shares of Senior Preferred Stock were
issued to Santa Fe pursuant to the Merger. The shares have a par value of
$.01, have an aggregate liquidation preference of $52,000,000, or $25 per
share, and are senior in liquidation preference to all other classes of equity
securities of the Company. At December 31, 1994, 2,335,907 shares of Senior
Preferred Stock were outstanding. Dividends accumulate at a rate of 11.25% per
annum of the liquidation preference ($2.81 per share per year) from December
14, 1993 through December 31, 1995 and 10.70% per annum ($2.67 per share per
year) commencing January 1, 1996. Dividends are cumulative and are payable
quarterly in arrears. Through December 31, 1995, dividends are payable only in
shares of Senior Preferred Stock having a liquidation preference equal to the
dividend payable. Beginning January 1, 1996, dividends are payable only in
cash.
Beginning January 1, 1999, the Senior Preferred Stock is redeemable
for cash at the option of the Company, in whole or in part, at per share
redemption prices which begin at $26.25 for 1999 and decrease to $25.00 for
2004 and thereafter. The Securities Purchase Agreement and the Bank Credit
Agreement limit such redemption.
Holders of Senior Preferred Stock have class voting rights in
connection with certain fundamental corporate transactions, including
amendments to the Company's certificate of incorporation that would alter or
change the powers, preferences or special rights of such stock so as to affect
them adversely, certain mergers and consolidations involving the Company that
may have a material adverse effect on such powers, preferences or special
rights and the creation of senior or pari passu securities. In addition, if at
any time regular dividends are in an amount equal to six full quarterly regular
dividend payments in arrears and unpaid, then until all such regular dividend
payments shall be paid in full, the holders of the Senior Preferred Stock,
voting separately as a class, will be entitled to elect two directors of the
Company.
Junior Exercisable Automatically Convertible Preferred Stock, Series B ("New
Junior Preferred Stock")
On December 14, 1993, 4,983,180 shares of New Junior Preferred Stock
were issued through the Merger to the holders of the 8% Junior Preferred Stock
and the holders of the common stock pursuant to the conversion of such stock in
the Merger. Each share of New Junior Preferred Stock has a par value of $.01
and a liquidation preference of $.75. No dividends are payable on the New
Junior Preferred Stock. At December 31, 1994, 4,981,691 shares of New Junior
Preferred Stock were outstanding. Each share of New Junior Preferred Stock
entitles the holder to purchase one share of
F-17
<PAGE> 61
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(6) CAPITAL STOCK (Continued)
Common Stock (an aggregate of 4,983,180 shares) upon surrender of such share of
New Junior Preferred Stock and payment of the exercise price of $3.225 per
share of Common Stock (in each case subject to adjustment under certain
circumstances) until the date of automatic conversion described below.
Pursuant to the trust agreement governing the H/P Trust, the Company is
required to deposit all proceeds from such exercise to the H/P Trust as
described below.
The H/P Trust was established by the Company in connection with the
Merger. As a result of the Merger, Prudential received the "P Interest" in the
H/P Trust, which initially represented beneficial ownership of all of the Trust
Shares. As holders of New Junior Preferred Stock exercise their right to
purchase shares of Common Stock, the Company will periodically deposit to the
H/P Trust all proceeds of such exercises. At the end of each calendar quarter
and upon termination of the H/P Trust, if the dollar amount of exercise
proceeds held in the H/P Trust has reached certain levels, the trustee will pay
such proceeds to Prudential and will distribute a corresponding number of Trust
Shares to the Company. Upon termination of the H/P Trust, all remaining Trust
Shares, if any, will be distributed to Prudential.
Each outstanding share of New Junior Preferred Stock will
automatically convert into .001 of a share of Common Stock on the earlier of
(i) the date that is 30 days after the first date (the "Trigger Date") on which
the closing price per share of the Common Stock on each of the immediately
preceding 40 consecutive trading days shall have exceeded 200% of the exercise
price of the New Junior Preferred Stock in effect on such trading day (the
Company will be required to mail a notice of such automatic conversion to each
holder of shares of New Junior Preferred Stock within 10 days following the
Trigger Date) or (ii) December 14, 1995.
(7) INCOME TAXES
The significant components of income tax (benefit) are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1992 1993 1994
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Current:
Federal $ (1,180) (145) 6
State 379 60 76
------------- ------------- ------------
(801) (85) 82
------------- ------------- ------------
Deferred:
Federal (438) (204) (1,213)
State 100 (405) (873)
------------- ------------- ------------
(338) (609) (2,086)
------------- ------------- ------------
Total income tax (benefit) $ (1,139) (694) (2,004)
============= ============= ============
Relates to:
Continuing operations $ (1,139) (616) (2,004)
Discontinued operations - (78) -
------------- ------------- ------------
$ (1,139) (694) (2,004)
============= ============= ============
</TABLE>
F-18
<PAGE> 62
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(7) INCOME TAXES (Continued)
Reconciliations from the expected statutory income tax (benefit) to
the income tax (benefit) are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1992 1993 1994
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Expected statutory income tax (benefit) $ (8,265) (3,746) (1,033)
Increases (reductions) in taxes resulting from:
Capital loss (utilization) carryover (215) (8,491) 77
State taxes, net of federal benefit 19 (151) (594)
Amortization of goodwill 115 1,160 -
Gain or loss on disposition of affiliates 3,741 5,412 -
Equity in earnings of unconsolidated
affiliate 1,420 (47) (77)
Net operating loss carryover 3,761 6,707 527
Other (1,715) (1,538) (904)
----------- ----------- -----------
Income tax (benefit) $ (1,139) (694) (2,004)
=========== =========== ===========
</TABLE>
Temporary differences between the financial statement carrying amounts
and the tax bases of assets and liabilities that give rise to significant
portions of the deferred tax liabilities at December 31, 1992, 1993 and 1994
relate to the following:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1992 1993 1994
---- ---- -----
(In Thousands)
<S> <C> <C> <C>
Property, equipment and improvements and
related depreciation, depletion and
amortization $ 3,044 13,005 12,313
Investment in unconsolidated affiliates 870 - -
Other - 1,263 -
----------- ----------- -----------
Gross deferred tax liabilities 3,914 14,268 12,313
----------- ----------- -----------
Investment in unconsolidated affiliates - (10) (84)
Accounts receivable (70) (275) (338)
Accrued liabilities (417) (1,132) (537)
Net operating loss carryover (19,826) (17,585) (19,089)
Capital loss carryover (15,561) (6,306) (94)
General business credit carryover (8,431) (7,887) (7,723)
Depletion carryover (702) (1,021) (1,021)
(16) - (374)
----------- ----------- -----------
Gross deferred tax assets (45,023) (34,216) (29,260)
Deferred tax assets valuation allowance 41,629 22,647 17,730
----------- ----------- -----------
$ 520 2,699 783
=========== =========== ===========
</TABLE>
F-19
<PAGE> 63
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(7) INCOME TAXES (Continued)
The net change in the valuation allowance for deferred tax assets was
a decrease of $8,561,000 in 1992, a decrease of $18,982,000 in 1993, and a
decrease of $4,917,000 in 1994. The decrease in 1992 was primarily attributable
to the anticipated $28,479,000 reduction of the net operating loss which would
have been required had the Company made a certain election under the Internal
Revenue Code of 1986, as amended. The net decrease in 1993 was primarily
attributable to additional expected utilization of net operating loss
carryovers against the future realization of the taxable temporary differences
created as a result of the Merger. The net decrease in 1994 was primarily
attributable to the expiration of capital loss carryovers for which a valuation
allowance had been provided.
At December 31, 1994, the Company has carryovers of tax benefits as
follows:
<TABLE>
<CAPTION>
Tax
--------------
(In Thousands)
<S> <C>
Net operating losses $ 121,798
Alternative minimum tax net operating losses $ 109,016
General business credits $ 7,723
Minimum tax credit $ 561
Depletion $ 3,003
</TABLE>
The depletion carryover is not subject to expiration. All other
carryovers expire principally between 1998 and 2009.
All of the carryovers of tax benefits generated prior to the December
16, 1992 effective date of the Company's plan of reorganization under Chapter
11 of the Bankruptcy Code (see Note 2) are, due to the greater than 50% change
of ownership effected by such plan, subject to an annual limitation of
$4,451,000 under sections 382 and 383 of the Code. Such annual limitation may
be increased by any realized built-in gains and unused annual limitation from a
prior year. Accordingly, the portion of the carryovers above not limited under
section 382 consist of the $11,132,000 regular net operating loss and
$10,696,000 alternative minimum tax net operating loss generated during the
period from December 17, 1992 to December 31, 1994.
(8) DERIVATIVE TRANSACTIONS
The Company uses commodity-based derivative instruments to hedge
exposure to price fluctuations related to the purchase or sale of natural gas
for future periods generally not in excess of four years. These derivative
instruments include exchange-traded futures contracts and commodity swap
agreements that are settled in cash.
At December 31, 1994, the Company had exchange-traded futures
contracts with maturities through March 1996, covering 13,240,000 MMBtu of
natural gas. These futures contracts permit settlement by delivery of natural
gas and, therefore, are not financial instruments as defined by SFAS No. 119,
Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments.
The commodity swap agreements consist of fixed price swap agreements
and basis swap agreements. Under these agreements, the Company receives or
makes payments based on the differential between a specified price and an
agreed upon price based on the actual price of natural gas. The basis swap
agreements are used to supplement the futures contracts or the fixed price swap
agreements.
F-20
<PAGE> 64
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(8) DERIVATIVE TRANSACTIONS (Continued)
During the four year period ending December 31, 1998, the Company will
pay either variable or fixed prices averaging $2.14 per MMBtu and receive
variable or fixed prices averaging $1.74 per MMBtu on notional quantities
amounting to 31,312,000 MMBtu of natural gas, for fixed price swap agreements.
Under the basis swap agreements, during this same four year period, the Company
will pay prices averaging $1.56 per MMBtu and receive prices averaging $1.54
per MMBtu on notional quantities amounting to 39,926,000 MMBtu of natural gas.
Expected profits on anticipated sales relating to these agreements will exceed
the unrealized losses on all swap agreements.
The Company remains at risk for possible changes in the market value
of hedging instruments; however, such risk should be mitigated by price changes
in the underlying hedged item. The Company is also exposed to credit-related
losses in the event of nonperformance by counterparties to the commodity swap
agreements. The credit worthiness of counterparties is subject to continuing
review, and full performance is anticipated.
Deferred realized losses related to closed swap agreements that are
hedging future firm sale commitments amounted to $894,000 at December 31, 1994.
These deferred losses will be recognized in operations in 1995 when the
corresponding sales transaction is completed.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of
the Company's financial instruments at December 31, 1993 and 1994. SFAS No.
107, Disclosures about Fair Value of Financial Instruments, defines the fair
value of a financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale.
<TABLE>
<CAPTION>
1993 1994
----------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(In Thousands)
<S> <C> <C> <C> <C>
Non-derivatives:
Assets
Cash and cash equivalents $ 2,466 2,466 3,109 3,109
Accounts receivable 85,097 85,097 76,045 76,045
Other assets - - 1,250 1,250
Liabilities
Bank borrowings and current
long-term debt 2,900 2,900 10,578 10,578
Long-term debt 53,900 53,900 57,372 57,372
Derivatives:
Assets - - 894 894
Liabilities - - - 13,055
</TABLE>
F-21
<PAGE> 65
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The carrying amounts in the table are included in the accompanying
consolidated balance sheets under the indicated captions.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Non-derivatives
Cash and cash equivalents and Accounts receivable: The carrying
amount approximates fair value because of the short maturity of those
instruments.
Other assets: The carrying amount of the $1,250,000 in Independent
Gas Holdings, Inc., Series B Cumulative Redeemable Convertible
Preferred Stock approximates fair value because the securities were
issued late in 1994 and were priced to approximate a market yield for
similar securities.
Bank borrowings: The carrying amount of the Bank Credit Agreement
approximates fair value because the credit facility is priced at an
interest rate that corresponds with a market rate.
Current and Long-term debt: The carrying amount of the 8% senior
secured notes approximates fair value because those instruments were
priced to approximate a market yield for similar securities, and there
has been no significant change in the market yield since their
issuance in 1993. The carrying amount of the Limited Recourse Credit
Agreement approximates fair value because the agreement is priced at
an interest rate that corresponds with a market rate. The carrying
amount of the Santa Fe 9% subordinated note approximates fair value
because the note was issued late in 1994 and was priced to approximate
a market yield for similar securities.
Derivatives
The fair value generally reflects the estimated amounts that the
Company would receive or pay to terminate swap agreements at the
reporting date, thereby taking into account the current unrealized
losses of open swap agreements. Dealer quotes are available for most
of the Company's swap agreements.
(10) EMPLOYEE BENEFIT PLANS
Effective January 1, 1992, the Hadson Employee Stock Ownership/401(k)
Savings Plan (the "Old Employee Plan"), which was organized into two parts, the
Profit Sharing Portion and the ESOP Portion, was amended and restated as the
Hadson Corporation Employee 401(k) Savings Plan (the "Employee Plan"). Under
the Employee Plan, the ESOP Portion of the Old Employee Plan was eliminated.
Additionally, the Employee Plan provides for the Company matching of a
participant's contribution, which can range from 3% to 8% based upon length of
service. Employees vest immediately in their contribution. The Company's
contribution vests over a four-year period of service. The Company's
contribution to the Employee Plan for each of the years ended December 31,
1992, 1993 and 1994 was $347,000, $351,000 and $411,000, respectively.
The Company also has various incentive compensation plans for officers
and employees. Amounts available for incentive compensation are based on
various financial and operational results. For each of the years ended
December 31, 1992, 1993 and 1994, such incentive compensation amounted to
$121,000, $62,000 and $-0-, respectively.
F-22
<PAGE> 66
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(10) EMPLOYEE BENEFIT PLANS (Continued)
In connection with the 1992 Restructuring, all existing stock options
and warrants were cancelled and the Company implemented a new Stock Option Plan
(the "Stock Plan") for the benefit of employees and non-employee directors.
The maximum number of shares of Common Stock issuable under the Stock Plan was
300,000 at December 31, 1992, 633,365 at December 31, 1993, and 3,900,000 at
December 31, 1994. The exercise price of options granted under the Stock Plan,
other than incentive stock options, must be equal to the market value of the
Common Stock at the date of grant. Options are exercisable in whole or in part
over a 10-year period from the date of grant.
Information as to common shares subject to options is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1993 1994
---- ----
<S> <C> <C>
Shares outstanding at beginning of year 173,533 178,916
Changes in shares issuable:
Cancelled (72,950) (152,763)
Issued 78,333 1,308,832
---------- ----------
Shares outstanding at end of year 178,916 1,334,985
========== ==========
Shares available for grant under option plans at end of year 454,449 2,565,015
========== ==========
Price range of options outstanding $ 2.34 2.13
to to
4.20 4.20
Options exercisable 129,500 810,929
========== ==========
</TABLE>
(11) RELATED PARTY TRANSACTIONS
The Company and certain of its subsidiaries purchase natural gas from
and sell natural gas to Santa Fe and certain of its subsidiaries. For the
years ended December 31, 1993 and 1994, purchases from Santa Fe totalled
approximately $29,649,000 and $99,248,000, respectively, while sales to Santa
Fe totalled approximately $489,000 and $18,566,000, respectively. Trade
payables to Santa Fe at December 31, 1993 and 1994, were $18,796,000 and
$13,633,000, respectively, while trade receivables from Santa Fe were $328,000
and $1,604,000, respectively.
(12) COMMITMENTS AND CONTINGENCIES
The Company leases equipment and office facilities under
non-cancellable operating leases which expire from 1994 through 2004. The
leases require annual rentals of the following:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
1995 $ 1,538
1996 936
1997 623
1998 519
1999 489
Thereafter 2,892
------------
$ 6,997
============
</TABLE>
F-23
<PAGE> 67
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(12) COMMITMENTS AND CONTINGENCIES (Continued)
Rent expense for each of the years ended December 31, 1992, 1993 and
1994 was $2,157,000, $2,611,000, and $3,824,000, respectively.
In November 1994, Santa Fe and certain of the Company's subsidiaries
settled a lawsuit with third parties related to certain of the assets sold to
the Company pursuant to the Merger in December 1993. The settlement totalled
$5,700,000 with the Company's share of $2,350,000 being funded by Santa Fe with
a ten-year note (see Note 5).
The Company is subject to other various legal proceedings and claims
which arise in the normal course of business. In the opinion of management,
based in part on consultation with counsel, the amount of ultimate liability
with respect to those actions will not materially affect the Company's
financial position.
F-24
<PAGE> 68
HADSON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(13) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly results of operations for the years ended December 31, 1993
and 1994 are as follows:
1993:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
------- -------- ------- -------- -------
(In Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total revenue from continuing operations $ 132,385 121,407 123,319 146,674 523,785
========== ========== ========== ========== ==========
Gross profit (loss) from continuing
operations $ 2,479 2,099 236 (5,627) (813)
========== ========== ========== ========== ==========
Loss from continuing operations $ (1,793) (2,494) (939) (10,650) (15,876)
========== ========== ========== ========== ==========
Net earnings (loss) $ (1,793) (2,494) 4,742 (10,778) (10,323)
========== ========== ========== ========== ==========
Net earnings (loss) attributable to
common stock $ (1,793) (2,494) 4,742 (11,071) (10,616)
========== ========== ========== ========== ==========
Loss per share from continuing
operations $ (.22) (.29) (.15) (1.31) (1.93)
========== ========== ========== ========== ==========
Earnings (loss) per share $ (.22) (.29) .54 (1.37) (1.27)
========== ========== ========== ========== ==========
Weighted average number of shares 8,261 8,485 8,727 8,059 8,383
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1994:
FIRST SECOND THIRD FOURTH TOTAL
------- -------- ------- -------- -------
(In Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total revenue from continuing operations $ 193,164 177,279 191,925 190,413 752,781
=========== ========== ========== ========== ==========
Gross profit from continuing
operations $ 5,068 4,766 3,799 4,334 17,967
=========== ========== ========== ========== ==========
Earnings (loss) from continuing
operations $ 352 512 (1,020) (877) (1,033)
=========== ========== ========== ========== ==========
Net earnings (loss) $ 352 512 (1,020) (877) (1,033)
=========== ========== ========== ========== ==========
Net loss attributable to
common stock $ (1,007) (908) (2,496) (2,394) (6,805)
=========== ========== ========== ========== ==========
Loss per share from continuing
operations $ (.04) (.04) (.09) (.09) (.26)
=========== ========== ========== ========== ==========
Loss per share $ (.04) (.04) (.09) (.09) (.26)
=========== ========== ========== ========== ==========
Weighted average number of shares 25,690 25,691 25,691 25,691 25,690
=========== ========== ========== ========== ==========
</TABLE>
F-25
<PAGE> 69
Schedule VIII
HADSON CORPORATION AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Three Years Ended December 31, 1994
(In Thousands)
<TABLE>
<CAPTION>
Balance at Additions
beginning of charged to Balance at
year expenses Deductions end of year
------------- ------------ ------------ ------------
1992:
-----
<S> <C> <C> <C> <C>
Reserves deducted from assets
to which they apply:
Allowance for doubtful accounts $ 419 360 494(a) 285
============= ============ ============ ============
Deferred tax assets valuation
allowance $ 50,190 - 8,561 41,629
============= ============ ============ ============
1993
----
Reserves deducted from assets
to which they apply:
Allowance for doubtful accounts $ 285 925 322(a) 888
============= ============ ============ ============
Deferred tax assets valuation
allowance $ 41,629 319 19,301 22,647
============= ============ ============ ============
1994
----
Reserves deducted from assets
to which they apply:
Allowance for doubtful accounts $ 888 489 90 (a) 1,287
============= ============ ============ ============
Deferred tax assets valuation
allowance $ 22,647 1,459 6,376 17,730
============= ============ ============ ============
</TABLE>
(a) Receivable write-offs, net of recoveries.
F-26
<PAGE> 70
EXHIBIT INDEX
EXHIBIT DESCRIPTION
_______ ___________
Exhibits: (Asterisk (*) indicates exhibits incorporated
herein by reference.)
*2.01 - Agreement of Merger, dated as of July 28, 1993, by
and among Santa Fe, AGPC and the Company (filed as
exhibit (c)(i) to the Company's Schedule 13E-3, File
No. 5-14102, as amended, and incorporated herein by
reference)
*2.02 - Amendment No. 1 to Agreement of Merger, dated as of
November 9, 1993, by and among Santa Fe, AGPC and the
Company (filed as exhibit (c)(iv) to the Company's
Schedule 13E-3, File No. 5-14102, as amended, and
incorporated herein by reference)
2.03 - Agreement and Plan of Merger, dated as of February
10, 1995, by and among Company, Parent and Merger Sub
*3.01 - Restated Certificate of Incorporation of the Company
(filed as exhibit 4.01 to the Company's Registration
Statement on Form S-3, File No. 33-51373, and
incorporated herein by reference)
*3.02 - Amended and Restated Bylaws of the Company (filed as
exhibit 4.2 to the Company's Registration Statement
on Form S-3, File No. 33-51373, and incorporated
herein by reference)
3.03 - Certificate of Amendment to Restated Certificate of
Incorporation of the Company dated November 21, 1994
*4.01 - Specimen certificate of the Common Stock of the
Company (filed as exhibit 4.3 to the Company's
Registration Statement on Form S-3, File No.
33-51373, and incorporated herein by reference)
*4.02 - Specimen certificate of Senior Cumulative Preferred
Stock, Series A, of the Company (filed as exhibit
4.01 to the Company's Registration Statement on Form
S-4, File No. 33-68224, and incorporated herein by
reference)
*4.03 - Specimen certificate of Junior Exercisable Preferred
Stock, Series B, of the Company (filed as exhibit
4.02 to the Company's Registration Statement on Form
S-4, File No. 33-68224, and incorporated herein by
reference)
*4.04 - Securities Purchase Agreement, dated as of December
14, 1993, between the Company and Prudential (filed
as exhibit 4.2 to the Company's Current Report on
Form 8-K dated December 14, 1993 and incorporated
herein by reference)
<PAGE> 71
EXHIBIT INDEX (CONTINUED)
EXHIBIT DESCRIPTION
_______ ___________
*4.05 - Restated Securities Purchase Agreement, dated as of
December 16, 1992, by and between the Company and
Prudential (filed as Exhibit 10.1 to the Company's
Current Report on Form 8-K dated October 15, 1992 and
incorporated herein by reference)
*4.06 - Trust Agreement, dated as of December 14, 1993, among
the Company, Prudential and Liberty Bank and Trust
Company of Oklahoma City, N.A. as Trustee (filed as
exhibit 4.3 to the Company's Current Report on Form
8-K dated December 14, 1993 and incorporated herein
by reference)
*9 - Voting Agreement, dated December 14, 1993, between
Prudential and Santa Fe (filed as exhibit 9 to the
Company's Registration Statement on Form S-4, File
No. 33-68224, and incorporated herein by reference)
*10.01 - Form of Indemnity Agreement between the Company and
its directors (filed as exhibit 10.02 to the
Company's Registration Statement on Form S-2, File
No. 33-12577 and incorporated herein by reference)
*10.02 - Form of Employment Agreement, dated as of March 31,
1994, between the Company and J. E. Cannon (filed
as exhibit 10.02 to the Company's Form 10-K for the
year ended December 31, 1993 and incorporated herein
by reference)
*10.03 - Form of Employment Agreement, dated as of March 31,
1994, between the Company and Greg G. Jenkins (filed
as exhibit 10.03 to the Company's Form 10-K for the
year ended December 31, 1993 and incorporated herein
by reference)
*10.04 - Form of Amended and Restated Employment Agreement,
dated as of March 31, 1994, between the Company and
Robert P. Capps (filed as exhibit 10.07 to the
Company's Form 10-K for the year ended December 31,
1993 and incorporated herein by reference)
10.05 - Amendment to Employment Agreement, dated as of
November 10, 1994, between the Company and J. E.
Cannon.
10.06 - Amendment to Employment Agreement, dated as of
November 10, 1994, between the Company and Greg G.
Jenkins
10.07 - Amendment to Amended and Restated Employment
Agreement, dated as of November 10, 1994, between the
Company and Robert P. Capps
10.08 - Employment Agreement, dated as of July 18, 1994,
between the Company and Thomas W. Pounds
10.09 - Amendment to Employment Agreement, dated as of
November 10, 1994, between the Company and Thomas W.
Pounds
10.10 - Employment Agreement, dated as of August 1, 1994,
between the Company and Richard N. Coffman
10.11 - Amendment to Employment Agreement, dated as of
November 10, 1994, between the Company and Richard N.
Coffman
10.12 - Employment Agreement, dated as of November 10, 1994,
between the Company and Kathleen M. Eisbrenner
<PAGE> 72
EXHIBIT INDEX (CONTINUED)
EXHIBIT DESCRIPTION
_______ ___________
10.13 - Indemnification Agreement, dated as of December 20,
1994, between Company and J. Michael Adcock
10.14 - Indemnification Agreement, dated as of December 20,
1994, between Company and B. M. Thompson
10.15 - Indemnification Agreement, dated as of December 20,
1994, between Company and James L. Payne
10.16 - Indemnification Agreement, dated as of December 20,
1994, between Company and Michael J. Rosinski
10.17 - Indemnification Agreement, dated as of December 20,
1994, between Company and J. Frank Haasbeek
10.18 - Indemnification Agreement, dated as of December 20,
1994, between Company and R. A. Walker
10.19 - Indemnification Agreement, dated as of December 20,
1994, between Company and J. E. Cannon
10.20 - Indemnification Agreement, dated as of December 20,
1994, between Company and Greg G. Jenkins
10.21 - Indemnity Agreement, dated as of November 10, 1988,
between Company and Robert P. Capps
10.22 - Indemnification Agreement, dated as of December 20,
1994, between Company and Kathleen M. Eisbrenner
10.23 - Indemnification Agreement, dated as of December 20,
1994, between Company and Thomas W. Pounds
10.24 - Indemnification Agreement, dated as of December 20,
1994, between Company and Richard N. Coffman
*10.25 - Hadson Corporation Employee 401(k) Savings Plan as
Amended and Restated Effective January 1, 1992 (filed
as exhibit 10.16 to the Company's Form 10-K for the
year ended December 31, 1991 and incorporated herein
by reference)
*10.26 - Credit Agreement, dated as of December 16, 1992,
among the Company and Prudential (filed as exhibit
10.2 to the Company's Current Report on Form 8-K
dated October 15, 1992 and incorporated herein by
reference)
*10.27 - Credit Agreement dated as of December 14, 1993 among
the Company, Gas Systems, United, Western and BMO,
individually and as Agent for the other Banks which
may become a party thereto (filed as exhibit 10.2 to
the Company's Current Report on Form 8-K dated
December 14, 1993 and incorporated herein by
reference)
*10.28 - Cash Collateral Agreement, dated as of July 15, 1993,
by and between the Company and Prudential (filed as
exhibit 10.21 to the Company's Registration Statement
on Form S-4, File No. 33-68224, and incorporated
herein by reference)
<PAGE> 73
EXHIBIT INDEX (CONTINUED)
EXHIBIT DESCRIPTION
_______ ___________
*10.29 - Amendment No. 1 to Cash Collateral Agreement, dated
as of August 31, 1993, by and among the Company and
Prudential (filed as exhibit 10.27 to the Company's
Registration Statement on Form S-4, File No.
33-68224, and incorporated herein by reference)
*10.30 - Registration Rights Agreement dated as of December
14, 1993 among the Company, Santa Fe and Prudential
(filed as exhibit 10.2 to the Company's Current
Report on Form 8-K dated December 14, 1993 and
incorporated herein by reference)
*10.31 - Form of Hadson Corporation 1992 Equity Incentive Plan
as amended and restated as of November 5, 1993
(included as Appendix V to the Proxy Statement
Prospectus dated April 22, 1994)
*10.32 - Hadson Corporation 1992 Equity Incentive Plan, as
amended and restated as of March 9, 1994 (filed as
exhibit 10.20 to the Company's Form 10-K for the year
ended December 31, 1993 and incorporated herein by
reference)
*10.33 - Form of Master Gas Purchase Agreement dated December
14, 1993 among Santa Fe, SFEOP and AGPC (filed as
exhibit 10.23 to the Company's Registration Statement
on Form S-4, File No. 33-68224, and incorporated
herein by reference)
*10.34 - Form of Nonstatutory Stock Option Agreement dated
December 13, 1993 that was entered between the
Company with each of Harry G. Hadler, S. D. Wilks,
C.D., and Walter C. Wilson (filed as exhibit 10.28 to
the Company's Registration Statement on Form S-4,
File No. 33-68224, and incorporated herein by
reference)
*10.35 - Form of Nonstatutory Stock Option Agreement dated
December 14, 1993 that was entered into by and
between the Company and each of Messrs. Payne,
Haasbeek, Thompson and Rosinski (filed as exhibit
10.23 to the Company's Form 10-K for the year ended
December 31, 1993 and incorporated herein by
reference)
10.36 - First Amendment to Credit Agreement, dated as of
December 30, 1994, by and among the Company, Gas
Systems, United, Western and BMO, individually and as
Agent for the other Banks party to the Credit
Agreement
10.37 - Letter Agreement, dated as of December 15, 1994,
between the Company and Santa Fe amending the Gas
Contract
11 - Computation of per share earnings
22 - List of subsidiaries of the Company
23 - Consent of independent public accountants
24 - Powers of Attorney
27 - Financial Data Schedule
<PAGE> 1
EXHIBIT 2.03
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AMONG
LG&E ENERGY CORP.,
CAROUSEL ACQUISITION CORPORATION
AND
HADSON CORPORATION
DATED AS OF FEBRUARY 10, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
THE MERGER
----------
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION
------------------------------------
2.1 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 By-laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
---------------------------------------------------
3.1 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE IV
CONVERSION OF COMPANY STOCK; COMPANY OPTIONS
--------------------------------------------
4.1 Conversion of Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Exchange of Certificates Representing Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4 Company Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
5.1 Existence; Good Standing; Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Authorization, Validity and Effect of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
5.7 Other Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.8 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.9 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.11 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.12 Certain Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.13 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.14 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.15 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.16 Maintenance of Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.18 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.19 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.20 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.21 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.22 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.23 Absence of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
-------------------------------------------------------
6.1 Existence; Good Standing; Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Authorization, Validity and Effect of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 Availability of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII
COVENANTS
---------
7.1 Takeover Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Stockholder Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Filings; Other Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.5 Inspection of Records; Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.7 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.9 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.10 Certain Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.11 Settlement of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.12 No Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.13 Payment of Certain Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VIII
CONDITIONS
----------
8.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Condition to Obligation of the Company to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . 31
8.3 Conditions to Obligation of Parent and Merger Sub to Effect the Merger . . . . . . . . . . . . . . . . . 32
ARTICLE IX
TERMINATION
-----------
9.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Termination by Either Parent or the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Termination by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4 Termination by Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5 Automatic Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.6 Effect of Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.7 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE X
GENERAL PROVISIONS
------------------
10.1 Survival of Representations and Warranties; Consequences of Inaccuracy . . . . . . . . . . . . . . . . . 34
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3 Assignment; Binding Effect; Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.6 Governing Law; Choice of Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.9 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.10 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
(iii)
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
10, 1995, among LG&E Energy Corp., a Kentucky corporation ("Parent"), Carousel
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary
of Parent ("Merger Sub"), and Hadson Corporation, a Delaware corporation (the
"Company").
RECITALS
A. The Board of Directors of each of Parent and Merger Sub,
believing it advisable for the respective benefit of Parent and Merger Sub and
their respective stockholders, has approved the merger of Merger Sub with and
into the Company (the "Merger") upon the terms and subject to the conditions
set forth herein.
B. The Board of Directors of the Company has received a fairness
opinion relating to the transactions contemplated hereby as more fully
described herein.
C. The Board of Directors of the Company and the special
committee thereof (the "Committee"), believing it advisable for the benefit of
the Company and its stockholders, has agreed to submit to the Company's
stockholders for their approval the Merger upon the terms and subject to the
conditions set forth herein.
D. Concurrently with the execution and delivery of this
Agreement, Parent and Merger Sub are entering into Securities Purchase
Agreements with Santa Fe Energy Resources, Inc., a Delaware corporation ("Santa
Fe"), and The Prudential Insurance Company of America, a New Jersey
corporation, Pruco Life Insurance Company, a New Jersey corporation, and
Prusupply, Inc., an Arizona corporation (collectively, "Prudential") (the
"Securities Purchase Agreements").
E. Parent, Merger Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub shall
be merged with and into the Company in accordance with this Agreement and the
separate corporate existence of Merger Sub shall thereupon cease (the
"Merger"). The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"). The Merger
shall have the effects specified in the Delaware General Corporation Law (the
"DGCL").
<PAGE> 6
1.2 THE CLOSING. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at the
offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 4100 First City Center,
1700 Pacific Avenue, Dallas, Texas at 9:00 a.m., local time, on the first
business day immediately following the later of (a) the day on which the last
to be fulfilled or waived of the conditions set forth in Article 8 shall be
fulfilled or waived in accordance herewith (or such later date, not more than
ten days thereafter, as the parties may mutually agree upon) or (b) if
applicable, the twentieth calendar day after the mailing of the information
statement described in Section 7.3(b). The date on which the Closing occurs is
hereinafter referred to as the "Closing Date".
1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth
in Article 8 shall have been fulfilled or waived in accordance herewith and
this Agreement shall not have been terminated as provided in Article 9, the
parties hereto shall cause a Certificate of Merger meeting the requirements of
Section 251 of the DGCL to be properly executed and filed in accordance with
such Section on the Closing Date. The Merger shall become effective at the
time of filing of the Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with the DGCL or at such later time which the
parties hereto shall have agreed upon and designated in such filing as the
effective time of the Merger (the "Effective Time").
ARTICLE II
CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Company in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation, until
duly amended in accordance with applicable law.
2.2 BY-LAWS. The By-laws of Merger Sub in effect immediately
prior to the Effective Time shall be the By-laws of the Surviving Corporation,
until duly amended in accordance with applicable law.
ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 DIRECTORS. The directors of Merger Sub immediately prior to
the Effective Time shall be directors of the Surviving Corporation as of the
Effective Time, unless and until thereafter changed in accordance with the DGCL
and the Surviving Corporation's Certificate of Incorporation and By-laws.
3.2 OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time, unless and until
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thereafter changed in accordance with the DGCL and the Surviving Corporation's
Certificate of Incorporation and By-laws.
ARTICLE IV
CONVERSION OF COMPANY STOCK; COMPANY OPTIONS
4.1 CONVERSION OF COMPANY STOCK. Subject to the terms and
conditions of this Agreement, at the Effective Time, by virtue of the Merger
and without any action on the part of Parent, Merger Sub, the Company or the
holder of any of the following securities:
(a) Each share of the common stock, $1.00 par value, of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and become one validly issued, fully paid and nonassessable
share of common stock, $.01 par value, of the Surviving Corporation.
(b) Each share of the common stock, $.01 par value, of
the Company (the "Company Common Stock") issued and outstanding immediately
prior to the Effective Time (other than shares of Company Common Stock to be
canceled pursuant to Section 4.1(c) hereof and shares of Company Common Stock
held by any holder who shall have properly exercised, and not withdrawn or
lost, appraisal rights under the DGCL) shall be converted into and become a
right to receive $2.75 in cash, without any interest thereon (the "Purchase
Price").
(c) Each share of Company Common Stock issued and held in
the Company's treasury (or beneficially owned by Parent or its subsidiaries,
including, without limitation, shares of Company Common Stock held in the "HP
Trust," as defined in, and as to which a beneficial interest is acquired by
Parent or Merger Sub pursuant to, the Securities Purchase Agreement among
Parent, Merger Sub and Prudential) at the Effective Time shall cease to be
outstanding and shall be cancelled and retired without payment of any
consideration therefor.
(d) Each share of Senior Cumulative Preferred Stock,
Series A (the "Series A Preferred") and Junior Exercisable Automatically
Convertible Preferred Stock, Series B (the "Series B Preferred") of the Company
issued and outstanding immediately prior to the Effective Time shall remain
unchanged and outstanding and shall represent one share of Series A Preferred
or Series B Preferred, as the case may be, of the Surviving Corporation.
4.2 EXCHANGE OF CERTIFICATES REPRESENTING COMPANY COMMON STOCK.
(a) Prior to the Effective Time, Parent shall deposit, or
shall cause to be deposited, with an exchange agent selected by Parent, which
shall be Parent's Transfer Agent or such other party reasonably satisfactory to
the Company (the "Exchange Agent"), for the benefit of the holders of
outstanding shares of Company Common Stock, for payment in accordance with this
Article 4, a sum in cash equal to the product of (i) the Purchase Price and
(ii) the number of shares of Company Common Stock issued and outstanding as set
forth in Section 5.4 (other than shares of Company Common Stock to be canceled
pursuant to Section
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<PAGE> 8
4.1(c) hereof and shares of Company Common Stock held by any holder who shall
have properly exercised, and not withdrawn or lost, appraisal rights under the
DGCL), such sum being hereinafter referred to as the "Exchange Fund", to be
paid pursuant to this Section 4.2 in exchange for outstanding shares of Company
Common Stock.
(b) Promptly after the Effective Time, Parent shall cause
the Exchange Agent to mail to each holder of record of a certificate or
certificates representing outstanding shares of Company Common Stock (other
than shares of Company Common Stock to be canceled pursuant to Section 4.1(c)
hereof and shares of Company Common Stock held by any holder who shall have
properly exercised, and not withdrawn or lost, appraisal rights under the DGCL)
(i) a letter of transmittal which shall specify that delivery of such
certificates shall be effected, and risk of loss and title to the certificates
shall pass, only upon delivery of the certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify and (ii) instructions for use in effecting the surrender of the
certificates in exchange for payment of the Purchase Price per share hereunder.
Upon surrender of a certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, the holder of such certificate shall be entitled to
receive in exchange therefor, in cash, without interest, the product of (x) the
Purchase Price and (y) the number of shares of Company Common Stock represented
by such certificates so surrendered by such holder, and the certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, the Exchange Agent may condition payment hereunder upon
the surrender of the certificate representing such Company Common Stock to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have
been paid.
(c) At or after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the shares of Company
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, certificates are presented to the Surviving
Corporation, they shall be exchanged for payment and cancelled in accordance
with the procedures set forth in this Article 4.
(d) Any portion of the Exchange Fund (including the
proceeds of any investments thereof) that remains unclaimed by the former
stockholders of the Company twelve (12) months after the Effective Time shall,
at the option of the Surviving Corporation, be delivered to the Surviving
Corporation. Any former stockholders of the Company who have not theretofore
complied with this Article 4 shall thereafter look only to the Surviving
Corporation for payment of the Purchase Price in respect of each share of
Company Common Stock that such stockholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon.
(e) None of Parent, the Company, the Exchange Agent or
any other person shall be liable to any former holder of shares of Company
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
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<PAGE> 9
(f) If any certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such certificate, the Exchange
Agent will pay in respect of such lost, stolen or destroyed certificate an
amount of cash, without interest, equal to the product of (x) the Purchase
Price and (y) the number of shares of Company Common Stock previously
represented by such lost, stolen or destroyed certificate.
4.3 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are held by any record holder who
has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal rights in accordance with Section 262 of the DGCL (the
"Dissenting Shares") shall not be converted into the right to receive the
Purchase Price hereunder but shall instead become the right to receive such
consideration as may be determined to be due in respect of such Dissenting
Shares pursuant to the DGCL; provided, however, that any holder of Dissenting
Shares who shall have failed to perfect, or shall have withdrawn or lost, his
rights to appraisal of such Dissenting Shares, in each case under the DGCL,
shall forfeit the right to appraisal of such Dissenting Shares, and each of
such Dissenting Shares shall be deemed to have been converted into the right to
receive, as of the Effective Time, the Purchase Price in accordance with
Article 4, without interest. Notwithstanding anything contained in this
Section 4.3, if (i) the Merger is rescinded or abandoned or (ii) if the
stockholders of the Company revoke the authority to effect the Merger, then the
right of any stockholder to receive such consideration as may be determined to
be due in respect of such Dissenting Shares pursuant to the DGCL shall cease.
The Surviving Corporation shall comply with all of its obligations under the
DGCL with respect to holders of Dissenting Shares.
(b) The Company shall give Parent (i) prompt notice of
any demands for appraisal, and any withdrawals of such demands, received by the
Company and any other related instruments served pursuant to the DGCL and
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent, make any payment
with respect to any demands for appraisal or offer to settle any such demands.
4.4 COMPANY OPTIONS. The Company shall use all reasonable efforts
to provide that, immediately prior to the Effective Time, each outstanding
option to purchase shares of Company Common Stock, each stock appreciation
right, and each limited stock appreciation right or other similar right
(individually, a "Company Option" and collectively, the "Company Options")
granted under the Hadson Corporation 1992 Equity Incentive Plan, as amended and
restated as of March 9, 1994, the Nonstatutory Stock Option Agreement dated
December 13, 1993, and the Nonstatutory Stock Option Agreement dated December
14, 1993 (collectively, the "Company Option Plans"), whether or not
exercisable, shall be cancelled and surrendered to the Company and each holder
of each such outstanding option, outstanding stock appreciation right and
outstanding limited stock appreciation right or other outstanding similar right
shall be entitled to receive from the Company, upon surrender of the applicable
right, with respect to each such
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<PAGE> 10
right, an amount in cash equal to the excess, if any, of the Purchase Price
over the exercise price per share of Company Common Stock of such right. As
used herein, the term "Option Cash-Out Amount" shall mean the sum of (a) all
payments made by the Company to effect the cancellation and surrender of
Company Options pursuant to this Section 4.4 and (b) the amount by which (i)
the product of $2.75 multiplied by the number of shares of Company Common Stock
issued upon exercise of Company Options exercised after the date of this
Agreement and prior to the Effective Time exceeds (ii) the sum of all payments
received by the Company upon the exercise of such Company Options during such
period.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter delivered by or on behalf
of the Company to Parent at or prior to the execution hereof (the "Company
Disclosure Letter"), the Company represents and warrants to Parent as follows:
5.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. The Company is
a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. The Company is duly licensed or qualified
to do business as a foreign corporation and is in good standing under the laws
of each other state of the United States in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
licensed or qualified or be in good standing would not, individually or in the
aggregate, be reasonably expected to have a material adverse effect on the
business, assets, liabilities, financial condition or prospects (the
"Condition") of the Company and its Subsidiaries taken as a whole (a "Material
Adverse Effect"). The Company has all requisite corporate power and authority
to own, operate and lease its properties and carry on its business as now
conducted. The copies of the Company's Restated Certificate of Incorporation,
dated December 14, 1993, as amended by the Certificate of Amendment to Restated
Certificate of Incorporation, dated November 21, 1994, and By-laws, dated
December 14, 1993, previously delivered to Parent are true and correct.
5.2 COMPLIANCE WITH LAW. Neither the Company nor any of its
Subsidiaries is in violation of any order of any court, governmental authority
or arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which the Company or any of its Subsidiaries or any of their
respective properties or assets is subject, except where such violation would
not, individually or in the aggregate, have a Material Adverse Effect. The
Company and its Subsidiaries (a) have made all required filings, applications,
notifications and reports, and amendments thereto, with all federal, state,
local or foreign governmental authorities (the "Filings") and (b) possess all
licenses, permits, ordinances, franchises, certificates, and other
authorizations of any federal, state, local or foreign governmental authority
(the "Licenses") which are necessary to the ownership or operation of their
business as currently conducted or to collect the current fees, prices, rates
or other charges levied in connection with their business and all such Filings
and Licenses are in full force and effect and no proceeding is pending or, to
the Company's knowledge, threatened seeking the revocation or limitation of any
such Filing
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<PAGE> 11
or License, except where the failure to make any Filing or possess any License
or the failure of any such Filing or License to be in such force and effect or
the revocation or limitation of such Filing or License would not, individually
or in the aggregate, have a Material Adverse Effect.
5.3 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS.
(a) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and all agreements and
documents contemplated hereby. Upon receipt of the approval of this Agreement
and the transactions contemplated hereby by the holders of a majority of the
outstanding shares of Company Common Stock, the consummation by the Company of
the transactions contemplated hereby will have been duly authorized by all
requisite corporate action. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
(b) The Board of Directors of the Company has taken all
necessary action to approve the transactions contemplated by this Agreement and
the Securities Purchase Agreements pursuant to Section 203(a) of the DGCL.
5.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock, and 25,000,000 shares of
preferred stock, par value $.01 per share (the "Company Preferred Stock"),
5,193,250 shares of which have been designated Series A Preferred and 4,983,180
shares of which have been designated Series B Preferred. As of the date
hereof, there are 25,690,890 shares of Company Common Stock issued and
outstanding, 2,271,496 shares of Series A Preferred issued and outstanding and
4,981,743 shares of Series B Preferred issued and outstanding. No additional
shares of capital stock of the Company have been issued or will be issued prior
to the Effective Time except such shares of Company Common Stock as may be
issued upon exercise of Company Options or shares of Series B Preferred
outstanding as of the date hereof. All such issued and outstanding shares of
Company Common Stock and Company Preferred Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. Other than as
contemplated by this Agreement, the Company Option Plans or the Series B
Preferred, there are not at the date of this Agreement any existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments which obligate the Company or any of its Subsidiaries
to issue, transfer or sell any shares of capital stock of the Company or any of
its Subsidiaries. As of the date of this Agreement, there are reserved for
issuance, and issuable upon or otherwise deliverable in connection with the
exercise of outstanding Company Options, the number of shares of Company Common
Stock set forth in the Company Disclosure Letter; since that date, no Company
Options have been granted under the Company Option Plans and no new option
plans have been authorized or adopted and no options have otherwise been
granted. After the Effective Time, the Surviving Corporation will have no
obligation to issue, transfer or sell any shares of capital stock of the
Company or the Surviving Corporation pursuant to any Company Benefit Plan (as
defined in Section 5.12) except pursuant to such Company Options, if any, as
shall not be cancelled and terminated prior to the Closing. Except for the
Company's obligations under the Trust Agreement dated as of December 14, 1993
among the Company, Prudential and
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<PAGE> 12
certain other parties (the "H/P Trust Agreement"), there are no outstanding
obligations of the Company or any of its Subsidiaries to purchase, redeem or
otherwise acquire any shares of Company Common Stock, any capital voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company. The Exercise Price (as such term is used in
the Company's Restated Certificate of Incorporation, dated December 14, 1993,
as amended through the date of this Agreement) of the Series B Preferred is
$3.225 per share of Company Common Stock.
5.5 SUBSIDIARIES. Each of the Company's subsidiaries (each a
"Subsidiary," and collectively the "Subsidiaries") is a corporation or
partnership duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, has the corporate or
partnership power and authority to own its properties and to carry on its
business as it is now being conducted, is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its property or the conduct of its business requires such qualification, except
for jurisdictions in which failure to be so licensed or qualified or to be in
good standing, individually or in the aggregate, would not have a Material
Adverse Effect. Each of the outstanding shares of capital stock of each of the
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
was not issued in violation of any preemptive rights and is owned, directly or
indirectly, by the Company free and clear of all liens, pledges, security
interests, claims or other encumbrances. The following information for each
Subsidiary has been previously provided to Parent, if applicable: (a) its name
and jurisdiction of incorporation or organization; (b) its authorized capital
stock or other ownership interests; and (c) the number of issued and
outstanding shares of capital stock or other ownership interests owned of
record or beneficially by the Company.
5.6 RELATED PARTY TRANSACTIONS. There are no contracts,
arrangements or transactions currently in effect between the Company or any of
its Subsidiaries, on the one hand, and Santa Fe, Prudential, or any officer,
director or 5% stockholder of the Company, or any affiliate of the foregoing
persons, on the other hand, except as set forth in the Company Reports (as
defined in Section 5.9).
5.7 OTHER INTERESTS. Except for interests in the Subsidiaries,
neither the Company nor any Subsidiary owns directly or indirectly any interest
or investment in any corporation, partnership, joint venture, business, trust
or entity.
5.8 NO VIOLATION. Neither the execution and delivery by the
Company of this Agreement nor the consummation by the Company of the
transactions contemplated hereby in accordance with the terms hereof will: (a)
result in a breach of any provisions of the certificate of incorporation or
By-laws (or similar governing documents) of the Company or any Subsidiary; (b)
result in a breach or violation of, a default under, or the triggering of any
payment or other material obligations pursuant to, or accelerate vesting under,
any of its existing Company Stock Option Plans, or any grant or award made
under any of the foregoing by reason of, in whole or in part, the consummation
of the Merger; (c) violate or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right
of termination or cancellation of, or accelerate the performance required by,
or give rise to any payments or
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<PAGE> 13
compensation under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties of the Company or its
Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any material license, franchise,
permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries or any of their properties is
bound or affected, except for any of the foregoing matters which would not,
individually or in the aggregate, have a Material Adverse Effect and will not
impose any liability on either Parent or Merger Sub; or (d) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets, except for violations which would not, individually or in the
aggregate, have a Material Adverse Effect or prevent or delay consummation of
the transactions contemplated hereby; (e) other than the filings provided for
in Article I and filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") or the Securities Exchange Act of
1934, as amended (the "Exchange Act") (collectively the "Regulatory Filings"),
require any consent, approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory authority, or any
other person or entity, the failure to obtain or make which would, individually
or in the aggregate, have a Material Adverse Effect or prevent or delay
consummation of the transactions contemplated hereby.
5.9 SEC DOCUMENTS.
(a) The Company has delivered to Parent each registration
statement, report (including any report on Form 8-K), proxy statement or
information statement prepared by it since December 31, 1993 and filed with the
Securities and Exchange Commission (the "SEC") pursuant to the Exchange Act,
including, without limitation, (i) its Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, (ii) its Quarterly Reports on Form 10-Q
for the periods ended March 31, June 30 and September 30, 1994 and (iii) its
Proxy Statement for the Annual Meeting of Stockholders held May 26, 1994, each
in the form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). As of their respective dates, the
Company Reports (including, without limitation, any financial statements or
schedules included or incorporated by reference therein) (1) were prepared in
all material respects in accordance with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act,
and the respective rules and regulations promulgated thereunder and (2) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents the consolidated financial position of the
Company and its Subsidiaries as of its date, and each of the consolidated
statements of income, retained earnings and cash flows of the Company included
in or incorporated by reference into the Company Reports (including any related
notes and schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of the Company and the Subsidiaries
for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which would not be material in
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<PAGE> 14
amount or effect), in each case in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods
involved, except as may be noted therein.
(b) In addition, the Company has delivered to Parent an
unaudited consolidated balance sheet of the Company as of December 31, 1994 and
an unaudited consolidated statement of income of the Company for the year then
ended, in each case without notes (collectively, the "Unaudited 1994
Statements"). The Unaudited 1994 Statements have been prepared from the
Company's accounting records using accounting methods consistent with those
used to prepare the financial statements included in the Company Reports and,
to the Company's knowledge, fairly present in all material respects the
unaudited consolidated financial position and unaudited results of operations
of the Company and its Subsidiaries as of and for the year ended December 31,
1994.
(c) Except as and to the extent set forth (i) on the
consolidated balance sheet of the Company and its Subsidiaries at September 30,
1994, including all notes thereto, (ii) on the consolidated balance sheet
included in the Unaudited 1994 Statements or (iii) in the Company Reports filed
with the SEC prior to the date of this Agreement, neither the Company nor any
of its Subsidiaries has any material liabilities or obligations (whether
accrued, absolute, contingent or otherwise), except liabilities arising in the
ordinary course of business since such date.
5.10 LITIGATION. Except as disclosed in the Company Reports filed
with the SEC prior to the date of this Agreement, there are no actions, suits
or proceedings pending against the Company or any of its Subsidiaries or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries or any of their respective properties or assets, at law or in
equity, or before or by any federal or state commission, board, bureau, agency
or instrumentality, that (a) if determined adversely, would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
(b) if determined adversely, would reasonably be expected to prevent or delay,
in any material respect, the consummation of the transactions contemplated by
this Agreement or (c) is a stockholder's derivative action on behalf of the
Company against any of its directors, officers, employees or agents. Except as
disclosed in the Company Reports filed with the SEC prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries is subject to any
order, writ, injunction or decree which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect or prevent or
delay the consummation of the transactions contemplated hereby.
5.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Company Reports filed with the SEC prior to the date of this Agreement, since
December 31, 1993, each of the Company and its Subsidiaries has conducted its
business only in the ordinary course and there has not been (a) any event or
change with respect to the Company and its Subsidiaries having or which would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, (b) any declaration, setting aside or payment of any dividend
or other distribution with respect to its capital stock or repurchase or
redemption of shares of its capital stock, (c) any material change in its
accounting principles, practices or methods, (d) any damage, destruction or
loss, whether or not covered by insurance, resulting in a Material Adverse
Effect, or any deterioration in the operating condition of the assets of the
Company and its Subsidiaries resulting in a Material Adverse Effect, (e) any
change or any threat of change
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in the Company's relations with, or any loss or threat of loss of, any of the
Company's important suppliers or customers which would reasonably be expected
to have a Material Adverse Effect, (f) any termination, cancellation or waiver,
or any material uncured violation, of any contract or other right material to
the operation of the business of the Company and its Subsidiaries, taken as a
whole, or (g) any payment in respect of indebtedness of the Company held by
Prudential or Company Preferred Stock.
5.12 CERTAIN EMPLOYEE PLANS.
(a) Each employee benefit or compensation plan or
arrangement, including each "employee benefit plan," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained by the Company or any of its Subsidiaries (the "Company Benefit
Plans") complies, and has been administered in accordance, with all applicable
requirements of law. All reports, returns and similar documents with respect
to the Company Benefit Plans required to be filed with any governmental entity
or distributed to any Company Benefit Plan participant have been duly and
timely filed or distributed. There are no pending or, to the Company's
knowledge, threatened investigations by any governmental entity, termination
proceedings or other claims (except claims for benefits payable in the normal
operation of the Company Benefit Plans), suits or proceedings against or
involving any Company Benefit Plan or asserting any rights or claims to
benefits under any Company Benefit Plan that would give rise to any liability.
The Company Benefit Plans are listed in the Company Disclosure Letter, and
copies and summary plan descriptions of all such plans have previously been
provided to Parent.
(b) With respect to each Company Benefit Plan intended to
qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), (i) a favorable determination letter has been issued by the
Internal Revenue Service (the "IRS") with respect to the qualification of each
Company Benefit Plan and (ii) no "reportable event" or "prohibited transaction"
(as such terms are defined in ERISA) or termination has occurred under
circumstances which present a risk of liability by the Company or any of its
Subsidiaries to any governmental entity or other person, including a Company
Benefit Plan. Each Company Benefit Plan which is subject to Part 3 of Subtitle
B of Title I of ERISA or Section 412 of the Code has been maintained in
compliance with the minimum funding standards of ERISA and the Code and no such
Company Benefit Plan has incurred any "accumulated funding deficiency" (as
defined in Section 412 of the Code and Section 302 of ERISA), whether or not
waived.
(c) All contributions to, and payments from, the Company
Benefit Plans required to be made in accordance with the Company Benefit Plans
have been timely made.
(d) Except as provided in the Hadson Corporation
Severance Benefits Plan or in individual employment agreements disclosed to
Parent and Merger Sub in the Company Disclosure Letter, neither the Company nor
any of its Subsidiaries maintains or contributes to or has an obligation to
contribute to any welfare plan, within the meaning of Section 3(1) of ERISA,
which provides, or has any liability to provide, life insurance, medical or
other employee welfare benefits to or on behalf of any employee or former
employee upon his or her retirement or termination of employment, except as may
be required by federal statute or such
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<PAGE> 16
benefits that may be unilaterally terminated by the Company or one of its
Subsidiaries at any time.
(e) Neither the Company nor any of its Subsidiaries or
any person or entity that is treated as a single employer with the Company or
any of its Subsidiaries within the meaning of Section 414 of the Code
maintains, contributes to or has an obligation to contribute to, or any
liability arising under a plan that is subject to Title IV of ERISA, including
a multiemployer plan, within the meaning of Section 4001(a)(3) of ERISA.
5.13 LABOR MATTERS.
(a) None of the Company or any of its Subsidiaries is a party to,
or bound by, any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization. There is no unfair
labor practice or labor arbitration proceeding pending or, to the knowledge of
the Company, threatened against the Company or its Subsidiaries relating to
their business. To the knowledge of the Company, there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of the Company or any of its
Subsidiaries.
(b) The Company has delivered to Parent copies of all employment
agreements, consulting agreements, severance agreements, bonus and incentive
plans, profit-sharing plans and other agreements, plans or arrangements with
respect to compensation of the employees of the Company and its Subsidiaries
(the "Compensation Arrangements"). The Merger will not accelerate or otherwise
give rise to payments pursuant to the Compensation Arrangements. The
Compensation Arrangements are listed in the Company Disclosure Letter.
5.14 ENVIRONMENTAL MATTERS.
(a) For the purposes of this Agreement:
"Assets" means all real or personal property owned or leased
by the Company or as to which an easement exists in favor of the Company.
"Environmental Matters" means any matter arising out of,
relating to or resulting from pollution, contamination, protection of the
environment, human health or safety, health or safety of employees, sanitation
and any matters relating to emissions, discharges, disseminations, releases or
threatened releases, of Hazardous Materials into the air (indoor and outdoor)
surface water, groundwater, soil, land surface or subsurface, buildings,
facilities, real or personal property or fixtures or otherwise arising out of,
resulting from or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, handling, release or threatened
release of Hazardous Materials.
"Environmental Costs" means, without limitation, any actual or
potential cleanup costs, remediation, removal, or other response costs (which
without limitation shall include costs to cause the Company to come into
compliance with Environmental Laws), investigation costs (including without
limitation fees of consultants, counsel and other experts in connection with
any environmental investigation, testing, audits or studies), losses,
liabilities or obligations
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<PAGE> 17
(including without limitation, liabilities or obligations under any lease or
other contract), payments, damages (including any actual, punitive or
consequential damages under any statutory laws, common law cause of action or
contractual obligations or otherwise, including charges (i) of third parties
for personal injury or property damage or (ii) to natural resources), civil or
criminal fines or penalties, judgments, and amounts paid in settlement arising
out of or relating to or resulting from any Environmental Matters.
"Environmental Laws" means, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601 et seq., the Emergency Planning and Community Right-to-Know Act
of 1986, 42 U.S.C. Sections 1101 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901 et seq., the Toxic Substances Control Act,
15 U.S.C. Sections 2601 et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. Sections 136 et seq., the Clean Air Act, 42
U.S.C. Sections 7401 et seq.,the Clean Water Act (Federal Water Pollution
Control Act), 33 U.S.C. Sections 1251 et seq., the Safe Drinking Water Act, 42
U.S.C. Sections 300f et seq., the Occupational Safety and Health Act, 29 U.S.C.
Sections 641 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Sections 1801 et seq., as any of the above statutes have been or may be amended
from time to time, all rules and regulations promulgated pursuant to any of the
above statutes, and any other foreign, federal, state or local law, statute,
ordinance, rule or regulation governing Environmental Matters, as the same have
been or may be amended from time to time, including any common law cause of
action providing any right or remedy with respect to Environmental Matters, all
indemnity agreements and other contractual obligations (including, without
limitation, leases, asset purchase and merger agreements) relating to
environmental matters, and all applicable judicial and administrative decisions,
orders, and decrees relating to Environmental Matters.
"Hazardous Materials" means any pollutants, contaminants or
hazardous or toxic substances, materials, wastes, constituents or chemicals
that are regulated by, or from the basis for liability under, any Environmental
Laws.
(b) The Company and each of its Subsidiaries at all times
has been operated, and is, in compliance with all applicable Environmental Laws
except for such failures to comply which would not reasonably be expected to
result in a Material Adverse Effect.
(c) The Company has obtained, and is in compliance with,
all permits, licenses, authorizations, registrations and other governmental
consents ("Environmental Permits") required to be obtained by it by applicable
Environmental Laws, including, without limitation, those regulating emissions,
discharges, or releases of Hazardous Materials, or the use, storage, treatment,
transportation, release, emission and disposal of raw materials, by-products,
wastes and other substances used or produced by or otherwise relating to its
business except for such failures to comply which would not reasonably be
expected to result in a Material Adverse Effect.
(d) All such Environmental Permits are in full force and
effect, and the Company has made all appropriate filings for issuance or
renewal of such Environmental Permits.
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<PAGE> 18
(e) All of the Assets of the Company are free of any
Hazardous Materials (except those authorized pursuant to and in accordance with
Environmental Permits held by the Company) and free of all contamination
arising from, relating to or resulting from any such Hazardous Materials except
for such failures to comply which would not reasonably be expected to result in
a Material Adverse Effect. Furthermore, (i) there are no polychlorinated
byphenyls ("PCBs"), mercury or PCB or mercury containing equipment at, on,
about, under or within any Assets owned, operated or controlled in whole or in
part by the Company or its Subsidiaries and (ii) all of the Company's Assets
are free of any groundwater contamination arising from, relating to or
resulting from any Hazardous Materials.
(f) There are no claims, notices, civil, criminal or
administrative actions, suits, hearings, investigations, inquiries or
proceedings pending or threatened that are based on or related to any
Environmental Matters or the failure to have any required Environmental
Permits.
(g) The Company has not used any waste disposal site, or
otherwise disposed of, transported or arranged for the transportation of, any
Hazardous Materials to any place or location (including any place or location
owned or operated by the Company), or in violation of any Environmental Laws.
(h) There are no underground or above ground storage
tanks, incinerators or surface impoundments at, on, about, under or within any
of the Assets, or any portion thereof.
(i) Neither the Company nor any of its Subsidiaries has
received any notice or other communication asserting that it may be a
potentially responsible party, or otherwise liable in connection with, any
waste disposal site or other location used for the disposal of any Hazardous
Materials or notice of any failure of the Company or any of its Subsidiaries to
comply in any material respect with any Environmental Law or the requirements
of any Environmental Permit.
(j) There are no past or present conditions, events,
circumstances, facts, activities, practices, incidents, actions, omissions or
plans: (i) that may interfere with or prevent continued compliance by the
Company with Environmental Laws and the requirements of Environmental Permits,
(ii) that may give rise to any liability or other obligation under any
Environmental Laws that may require the Company to incur any actual or
potential Environmental Costs or (iii) that may form the basis of any claim,
action, suit, proceeding, hearing, investigation or inquiry against or
involving the Company based on or related to any Environmental Matter or which,
in each case, could require the Company to incur any Environmental Costs which
would reasonably be expected to have a Material Adverse Effect.
(k) No lien exists, and no condition exists which could
result in the filing of a lien, against any property of the Company under any
Environmental Law or relating to any Environmental Matters.
(l) There has been no release or other dissemination at
any time of any Hazardous Materials at, on, or about, under or within any real
property currently or formerly owned or leased by the Company or any
predecessor of the Company or as to which an
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<PAGE> 19
easement in favor of the Company currently exists or formerly existed or any
real properties operated or controlled by the Company or any predecessor of the
Company (other than pursuant to and in accordance with permits held by the
Company or any such predecessor) which was required to be reported to any
governmental authority pursuant to any Environmental Law and which would
reasonably be expected to have a Material Adverse Effect.
(m) The Company has not been requested or required by any
governmental authority to perform any investigatory or remedial activity or
other action in connection with any Environmental Matter which would reasonably
be expected to have a Material Adverse Effect.
5.15 TITLE. Except as described in the Company Reports, the
Company and its Subsidiaries have good and defensible title to all real and
personal property owned by them and reflected on the Company's consolidated
balance sheet as of September 30, 1994 included in the Company Reports free and
clear of any and all liens, security interests, pledges, claims and other
encumbrances (each, a "Lien") other than Permitted Encumbrances, as defined
below, except for defects in title and Liens which, individually or in the
aggregate, would not have a Material Adverse Effect. "Permitted Encumbrances"
shall mean (a) inchoate Liens securing payments to mechanics and materialmen
for materials, labor and supplies furnished in the normal course of business of
the Company and its Subsidiaries and Liens securing payments of taxes or
assessments, that are, in the case of each Lien described in this clause (a),
not yet delinquent, or, if delinquent, that are being contested in good faith
in the normal course of business, (b) preferential rights to purchase and
required third party consents to assignments or similar agreements, except for
those rights that become exercisable upon, or consents required to be obtained
prior to, consummation of the Merger or the transactions contemplated hereby
and those rights and consents that remain unsatisfied with respect to any prior
transaction, (c) all applicable laws, rules, regulations and orders of any
municipality or governmental, tribal, statutory or public authority, (d) the
terms and conditions of all documents and agreements that create the easements,
licenses, permits, rights-of-way, surface leasehold interests, fee interests,
privileges, franchises, servitudes, prescriptions, surface use rights under oil
and gas leases and unitization agreements and similar property interests
reasonably necessary for operating and maintaining, on the lands where located,
the assets of the Company and its Subsidiaries (the "Easements"), (e) the terms
and conditions of the documents that transfer the Easements and other similar
documents or agreements under which the subject assets are held to the extent
same do not have a material adverse effect on the ownership, use, maintenance
or operation by the Company or its Subsidiaries of the subject assets to which
they pertain, (f) the terms and conditions of all operating agreements,
participation agreements, maintenance agreements and other agreements to which
any of such assets or properties are subject, to the extent same do not have a
material adverse effect on the ownership, use, maintenance or operation by the
Company or its Subsidiaries of the subject assets to which they pertain; and
(g) the fact that certain portions of the assets of the Company or its
Subsidiaries may be located on lands pursuant to rights to use the surface of
such lands under oil and gas leases and/or unitization agreements. To the
Company's knowledge, none of the Permitted Encumbrances materially interferes
with the use of any of the Company's assets in the conduct of the Company's
business in the ordinary course, nor do any of the Permitted Encumbrances
materially detract from the value of such assets as reflected on the Company's
financial statements included in the Company Reports.
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<PAGE> 20
5.16 MAINTENANCE OF FACILITIES. All physical facilities of the
Company and its Subsidiaries which are material to the Company have been
maintained in accordance with the Company's customary maintenance practices and
are in a state of repair (normal wear and tear accepted) adequate for the
normal use of such facilities in the ordinary conduct of the business of the
Company and its Subsidiaries.
5.17 INSURANCE. The Company Disclosure Letter lists all policies
of liability and property and casualty insurance in effect covering the Company
and its Subsidiaries (specifying the insurer, type of insurance, policy number
and pending claims thereunder with respect to the Company which are, in the
aggregate, material). There are no notices of any pending or threatened
terminations, or expectations of premium increases (other than increases of
general applicability), with respect to any of such insurance policies. The
Company is in substantial compliance with all conditions contained therein, and
the coverage of none of such policies will be terminated or adversely affected
by the transactions contemplated by this Agreement.
5.18 FAIRNESS OPINION. The Board of Directors of the Company has
received an opinion of Dillon, Read & Co. Inc. to the effect that, as of the
date hereof, the Merger consideration to be received by the holders of Company
Common Stock other than Santa Fe and Prudential is fair to such holders.
5.19 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor
any of its Subsidiaries is a "public utility company," a "holding company" or a
"subsidiary company" of a "holding company," or an "affiliate" of any of the
foregoing, in each case within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or the rules and regulations of the SEC
promulgated thereunder. Neither the Company nor any of its Subsidiaries is
subject to regulation as a utility under applicable state law.
5.20 TAXES.
(a) For purposes of this Section 5.20 the following terms
shall have the following meanings:
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable")
shall mean:
(i) any federal, state, local or foreign income,
gross receipts, windfall profits, severance, property, production,
sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, transfer,
excise, stamp, or environmental tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or
additional amount imposed by any governmental authority; and
(ii) liability of the Company or any Subsidiary
for the payment of amounts with respect to payments of a type
described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group, or as a result of
any
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<PAGE> 21
obligation of the Company or any subsidiary under a Tax Sharing
Arrangement or Tax indemnity arrangement or agreement.
"Tax Return" shall mean any return, report or similar
statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information
return, claim for refund, amended return and declaration of estimated
Tax.
"Tax Sharing Arrangement" shall mean any written or unwritten
agreement or arrangement for the allocation or payment of Tax
liabilities or payment for Tax benefits with respect to a
consolidated, combined or unitary Tax Return which Tax Return includes
the Company or any Subsidiary, and including, but not limited to, any
tax indemnity arrangement or agreement.
(b) All Tax Returns that are required to be filed on or
before the Closing Date by the Company or any of the Subsidiaries (including
but not limited to returns of any affiliated group of corporations filing
consolidated income tax returns of which the Company or Subsidiary was a
member) have been or will be correctly and accurately completed and timely
filed with the appropriate foreign, federal, state and local authorities and
disclose all taxes required to be paid by the Company and each Subsidiary for
the period covered by the Tax Return. All Taxes due from the Company or any
Subsidiary or for which the Company or any Subsidiary is liable with respect to
all taxable years or any portion thereof ending on or before the Closing Date
have been fully and timely paid or adequately reflected as an appropriate
liability or reserve on the Financial Statements even if they are being
contested in good faith by appropriate proceedings. No payments are or will be
required to be made by the Company or any Subsidiary pursuant to any Tax
Sharing Agreement and all such Tax Sharing Agreements will be terminated with
respect to the Company and each Subsidiary as of the Closing Date to the extent
they would require payments to be made by the Company or any Subsidiary.
(c) None of such Tax Returns are under audit or
examination by any foreign, federal, state or local authority and there are no
agreements or waivers providing for an extension of time with respect to the
assessment or collection of any Tax against the Company or any of the
Subsidiaries with respect to any such Tax Return. For all taxable years or
portions thereof ending on or before the Closing Date, no assessment of Taxes
has been made or proposed by any taxing authority against the Company or any
Subsidiary for which the Company or any Subsidiary is liable. The Company has
no knowledge of any facts that if known to any taxing authority would likely
result in the issuance of a notice of proposed deficiency or similar notice to
assess Taxes against the Company or any Subsidiary. The statute of limitations
for the collection of federal, state, local and foreign income taxes has been
extended only with respect to the jurisdictions and years in the Company
Disclosure Letter. The statute of limitations for the payment or collection of
gross receipts, sales and use taxes has been extended only with respect to the
jurisdictions and years set forth in the Company Disclosure Letter.
(d) All Taxes assessed and due and owing from or against
the Company or any of the Subsidiaries on or before the Closing Date
(including, but not limited to, ad valorem Taxes) have been or will be timely
paid in full or accrued on the Financial Statements on or before the Closing
Date.
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<PAGE> 22
(e) All withholding Tax and Tax deposit requirements
imposed on the Company or any of the Subsidiaries for any periods ending on or
before the Closing Date have been or will be timely satisfied in full or
accrued on the Financial Statements on or before the Closing Date.
(f) There has been no ownership change, as defined in
Section 382(g) of the Code (an "Ownership Change"), with respect to the Company
and Subsidiaries since December 16, 1992.
(g) The combined Net Operating Loss Carryforward as
determined for federal income tax purposes ("NOL") of the Company and its
Subsidiaries as of December 31, 1994 is approximately $120,000,000 of which
approximately $109,000,000 is subject to limitation under Section 382 of the
Code and approximately $11,000,000 is not currently subject to limitation under
Section 382 of the Code. The Company and its subsidiaries currently have some
NOL which is not subject to the SRLY Rules of Regulation Section 1.1502-21.
(h) The combined Net Operating Loss Carryforward as
determined for federal alternative minimum tax purposes ("AMTNOL") of the
Company and its Subsidiaries as of December 31, 1994 is approximately
$108,000,000 of which approximately $98,000,000 is subject to limitation under
Section 382 of the Code and approximately $10,000,000 is not currently subject
to limitation under Section 382 of the Code.
(i) The annual limitation for use of the NOL by the
Company and its Subsidiaries under Section 382 of the Code is at least
$4,451,852. The limitation under Section 382 of the Code applies to the
Affiliated Group of Corporations (as defined in Section 1504 of the Code) as a
whole and no Subsidiary is subject to a separate limitation under Section 382
of the Code or the Consolidated Return Regulations issued under Section 1502 of
the Code including any proposed regulations.
(j) The annual limitation for use of the AMTNOL by the
Company and its Subsidiaries under Section 382 of the Code is at least
$4,451,852. The limitation under Section 382 of the Code applies to the
Affiliated Group of Corporations (as defined in Section 1504 of the Code) as a
whole and no Subsidiary is subject to a separate limitation under Section 382
of the Code or the Consolidated Return Regulations issued under Section 1502 of
the Code including any proposed regulations.
(k) The Company and its Subsidiaries have made a proper
election under Section 382(1)(5)(H) of the Code with respect to the ownership
changes on December 16, 1992 and Section 382(l)(5)(D) of the Code will not
apply to the Company and its Subsidiaries with respect to any ownership change.
(l) The net unrealized built in gain of the Company and
the Subsidiaries for purposes of Section 382(h)(3)(A) of the Code with respect
to the Ownership Change on December 16, 1992 is approximately $50,000,000 as of
the Closing Date.
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<PAGE> 23
(m) The Company has not received on or before the Closing
Date any formal or informal communication from the Internal Revenue Service
("IRS") that it will not issue the rulings requested in the ruling request
filed by the Company dated August 26, 1994.
(n) The NOL and the AMTNOL of the Company are properly
allocated among the Company and the Subsidiaries as set forth in the Company
Disclosure Letter.
(o) The Company is entitled to and will file a
consolidated federal income tax return for the taxable year which ends on or
includes the Closing Date with each Subsidiary. The Company is the Common
Parent Corporation of the Affiliated Group of Corporations (as defined in
Section 1504 of the Code) which includes the Company. Each Subsidiary is an
includible corporation (as defined in Section 1504 of the Code). Each
Subsidiary is 100 percent owned by the Company or another member of the
Affiliated Group of Corporations of which the Company is the Common Parent
Corporation. The Company has filed a consolidated federal income tax return
with its Subidiaries each year since the year ending 1979. No consent pursuant
to the collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income tax law) or agreement
to have Section 341 (f)(2) of the Code (or any corresponding provision of
state, local or foreign income tax law) apply to any disposition of any asset
owned by the Company or any Subsidiary is in effect with respect to the Company
or any Subsidiary. None of the assets of the Company or any Subsidiary
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code. None of the assets of the Company or any
Subsidiary is "tax-exempt use property" within the meaning the Section 168(h)
of the Code. The Company and each Subsidiary have not agreed to make, nor is
it required to make, any adjustment under Section 481(a) of the Code by reason
of a change in accounting method or otherwise. The Company and each Subsidiary
are not a party to any agreement, contract, arrangement or plan that has
resulted or would result, separately or in the aggregate, in the payment or any
"excess parachute payments" within the meaning of Section 28OG of the Code. No
income or gain of the Company has been deferred pursuant to Treasury Regulation
Section 1.1502-13 or -14, or Temporary Treasury Regulations Section 1.1502-13T
or -14T. No excess loss account (as described in Treasury Regulation Section
1.1502-14, 1.1502-19 and 1.1502-32) exists with respect to the Company or any
Subsidiary except as set forth in the Company Disclosure Letter. No power of
attorney has been granted with respect to any matter relating to Taxes of the
Company or any Subsidiary which is currently in force except with respect to
the Ruling Request. None of the property of the Company or any Subsidiary is
required to be treated as owned by another person pursuant to Section 168(f)(8)
of the Code (as in effect prior to its amendment by the Tax Reform Act of
1986). The Company or any Subsidiary has not participated in or cooperated in
an international boycott, within the meaning of Section 999 of the Code, nor
has any such corporation had operations which are or may hereafter become
reportable under Section 999 of the Code. Neither the Company nor any
Subsidiary has disposed of property in a transaction being accounted for under
the installment method pursuant to Section 453 or 453A of the Code. The
Company or any Subsidiary has no corporate acquisition indebtedness, as
described in Section 279(b) of the Code. No transaction by this Agreement is
subject to withholding under Section 1445 of the Code and no stock transfer
taxes, real estate transfer taxes, or other similar taxes will be imposed on
the transfer of the Shares pursuant to this Agreement.
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<PAGE> 24
(p) Parent or its designee reserves the right to make an
election under Section 338(g) of the Code with respect to the acquisition of
the Company and its Subsidiaries. The consummation of the Merger pursuant to
this Agreement will not affect the status of the 1993 Merger as a qualified tax
free reorganization under 368(a)(1)(A) of the Code.
5.21 NO BROKERS. The Company has not entered into any contract,
arrangement or understanding with any person or firm, including any bonus or
similar arrangement with any officer, director or employee of the Company,
which may result in the obligation of the Company or Parent or Merger Sub to
pay any success fee, finder's fee, brokerage or agent's commission or other
like payment in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby, except that the
Company has retained S.G. Warburg & Co. Inc. and Dillon, Read & Co. Inc., the
arrangements with which have been disclosed in writing to Parent prior to the
date hereof. Other than the foregoing arrangements, the Company is not aware
of any claim against the Company for payment of any success fee, finder's fee,
brokerage or agent's commission or other like payment in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. The Company shall not pay any expenses of any stockholder
incurred in connection with the Merger or any other transaction contemplated by
this Agreement or the transactions contemplated by the Securities Purchase
Agreements.
5.22 MATERIAL CONTRACTS. Neither the Company nor any of its
Subsidiaries is a party to or bound by any lease, agreement or other contract
that would be required to be filed as an exhibit to the Annual Report on Form
10-K filed by the Company if that report were filed as of the date of this
Agreement that has not already been filed as an exhibit to any Company Report
that has been filed by the Company with the SEC after December 31, 1993.
5.23 ABSENCE OF OTHER AGREEMENTS. Neither the Company nor any of
its officers, directors or other authorized representatives has entered into
any agreement, letter of intent or similar agreement (whether oral or written)
with any party other than Parent and Merger Sub whereby all or a substantial
part of the Company, its capital stock or its debt instruments would be sold,
merged, consolidated, transferred or otherwise combined with or into another
entity.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to
the Company as follows:
6.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Parent
and Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of Parent
and Merger Sub is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of each other state of the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure
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to be so licensed or qualified or be in good standing would not have a material
adverse effect on the ability of Parent or Merger Sub to perform its respective
obligations hereunder (a "Parent Material Adverse Effect"). Parent has all
requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted. Merger Sub was
incorporated on January 30, 1995, and since its incorporation Merger Sub has
not conducted any business activities except in connection with the
transactions contemplated in this Agreement.
6.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of
Parent and Merger Sub has the requisite corporate power and authority to
execute and deliver this Agreement and all agreements and documents
contemplated hereby, and the consummation by Parent and Merger Sub of the
transactions contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement constitutes, and all agreements and documents
contemplated hereby (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of Parent
and Merger Sub, enforceable against each of them in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
6.3 NO VIOLATION. Neither the execution and delivery by Parent
and Merger Sub of this Agreement, nor the consummation by Parent and Merger Sub
of the transactions contemplated hereby in accordance with the terms hereof,
will: (a) result in a breach of any provisions of the Certificate of
Incorporation or By-laws of Parent or Merger Sub; (b) violate or result in a
breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or give rise to any payments or
compensation under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties of Parent or its Subsidiaries
under, or result in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any material license, franchise, permit, lease,
contract, agreement or other instrument, commitment or obligation to which
Parent or any of its Subsidiaries is a party, or by which Parent or any of its
Subsidiaries or any of their properties is bound or affected, except for any of
the foregoing matters which would not, individually or in the aggregate, have a
Parent Material Adverse Effect and will not impose any liability on the
Company; (c) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to Parent or any of its Subsidiaries or any of their
respective property or assets, except for violations which would not
individually or in the aggregate, have a Parent Material Adverse Effect; or (d)
based upon the representation and warranty of the Company made in Section 5.19
and compliance by the Company with Section 7.4, require any consent, approval
or authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority (other than the Regulatory Filings), or
any other person or entity, the failure to obtain or make which would have,
individually or in the aggregate, a Parent Material Adverse Effect.
6.4 AVAILABILITY OF FUNDS. Parent will have available at the
Closing sufficient funds to enable it to consummate the transactions
contemplated by this Agreement (upon the terms contained herein) and the
Securities Purchase Agreements (upon the terms contained therein).
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6.5 NO BROKERS. Neither Parent nor Merger Sub has entered into
any contract, arrangement or understanding with any person or firm which may
result in the obligation of the Company to pay any finder's fee, brokerage or
agent's commission or other like payment in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE VII
COVENANTS
7.1 TAKEOVER PROPOSALS. The Company agrees that, from and after
its execution of this Agreement through the Effective Time, it shall not, nor
shall it permit any of its Subsidiaries to, and it shall use its best efforts
to cause its officers, directors or employees, and all investment bankers,
attorneys or other advisors or representatives retained by the Company or any
of its Subsidiaries not to, (a) solicit or encourage the submission of, any
Takeover Proposal (as hereinafter defined), (b) enter into any agreement with
respect to any Takeover Proposal or (c) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, a Takeover Proposal; provided, however, that nothing
contained in this Section 7.1 shall prohibit the Board of Directors of the
Company from (x) furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited Takeover
Proposal if, in the judgment of the Committee after consultation with outside
counsel, such action may be required for the Board of Directors of the Company
to comply with its fiduciary duties to the Company and its stockholders; or (y)
from disclosing to the Company's stockholders a position with respect to a
tender offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act or from making such disclosure to the Company's
stockholders which, in the judgment of the Board of Directors, may be required
under applicable law. For purposes of this Agreement, "Takeover Proposal"
means any proposal or offer for a merger or other business combination
involving the Company or to acquire a material equity interest in, or a
substantial portion of the assets of, the Company, other than as contemplated
by this Agreement.
7.2 CONDUCT OF BUSINESS. Prior to the Effective Time, except as
specifically set forth in the Company Disclosure Letter or as contemplated by
any other provision of this Agreement, unless Parent has consented in writing
thereto, the Company:
(a) shall, and shall cause each of its Subsidiaries to,
conduct its operations according to its usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(b) shall use its reasonable efforts, and shall cause
each of its respective Subsidiaries to use its reasonable efforts, to preserve
intact its business organization and goodwill, keep available the services of
its officers and employees and maintain satisfactory relationships with those
persons having business relationships with it;
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(c) shall confer on a regular basis with one or more
representatives of Parent to report material operational matters;
(d) shall not amend its certificate of incorporation or
by-laws;
(e) shall promptly notify Parent of (i) any material
emergency or other material change in the Condition of the Company or the
Subsidiaries, (ii) any material litigation or material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) involving the Company or any of its Subsidiaries, or (iii) the
breach in any material respect of any representation or warranty or covenant of
the Company contained herein;
(f) shall promptly deliver to Parent true and correct
copies of any report, statement or schedule filed by the Company with the SEC
subsequent to the date of this Agreement;
(g) shall not (i) except pursuant to the exercise of
options, warrants, conversion rights and other contractual rights existing on
the date hereof and disclosed in the Company Reports, the Company Disclosure
Letter or otherwise pursuant to this Agreement, issue any shares of its capital
stock, effect any stock split or otherwise change its capitalization as it
exists on the date hereof, (ii) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to acquire any
shares of its capital stock from the Company, (iii) increase any compensation
or enter into or amend any employment, severance, termination or similar
agreement with any of its present of future officers or directors, except for
normal increases in compensation to employees consistent with past practice and
the payment of cash bonuses to employees pursuant to and consistent with
existing plans or programs or (iv) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or amend any
existing employee benefit plan in any material respect, except for changes
which are less favorable to participants in such plans or as may be required by
applicable law;
(h) shall not (i) declare, set aside or pay any dividend
or make any other distribution or payment with respect to any shares of its
capital stock (other than pay-in-kind dividends on the Series A Preferred in
accordance with its terms); (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of any of
its Subsidiaries, or make any commitment for any such action or (iii) split,
combine or reclassify any of its capital stock;
(i) not set aside or pay any interest or principal or
make any other distribution or payment with respect to any indebtedness of the
Company held by Prudential or Santa Fe (other than regularly scheduled interest
payments on such indebtedness held by Prudential or Santa Fe as of the date of
this Agreement or as required under Section 7.13 hereof);
(j) shall not, and shall not permit any of its
Subsidiaries to, acquire, sell, lease or otherwise dispose of any of its assets
(including capital stock of Subsidiaries) (i) with a fair market value in
excess of $250,000 or (ii) which are material, individually or in the
aggregate, to the Company's business except in the ordinary course of business;
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(k) shall not (i) incur or assume any long-term or
short-term debt or issue any debt securities except for borrowings under
existing lines of credit or the creation of trade payables in the ordinary
course of business; (ii) except with respect to obligations of wholly-owned
Subsidiaries of the Company; assume, guaranty, endorse or otherwise become
liable or responsible (whether directly, indirectly, contingently or otherwise)
for the obligations of any other person except in the ordinary course of
business consistent with past practices in an amount not material to the
Company and its Subsidiaries, taken as a whole; (iii) other than to
wholly-owned Subsidiaries of the Company, make any loans, advances or capital
contributions to, or investments in, any other person; (iv) pledge or otherwise
encumber shares of capital stock of the Company or its Subsidiaries; or (v)
mortgage or pledge any of its material assets, tangible or intangible, or
create or suffer to create any material mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect to such asset;
(l) except as may be required as a result of a change in
law or in generally accepted accounting principles shall not change any of the
accounting principles or practices used by the Company;
(m) shall not (i) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein; (ii) enter
into any contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to the Company and its
Subsidiaries taken as a whole; (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective property or assets, except for
violations which would not individually or in the aggregate, have a Parent
Material Adverse Effect; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action which would be
prohibited hereunder;
(n) shall not make any tax election or settle or
compromise any income tax liability material to the Company and its
Subsidiaries taken as a whole;
(o) shall not pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected, reserved against or
disclosed in the consolidated financial statements (or the notes thereto) of
the Company and its Subsidiaries or incurred in the ordinary course of business
consistent with past practice or in connection with the consummation of
transactions contemplated by this Agreement;
(p) shall not settle or compromise any pending or
threatened suit, action or claim relating to the transactions contemplated
hereby; or
(q) shall not take, or agree in writing or otherwise to
take any action that would constitute a breach of the covenants contained in
Section 7.2(a) through 7.2(p) or that would make any of the representations and
warranties of the Company contained in this Agreement untrue or incorrect as of
the date when made.
7.3 STOCKHOLDER ACTION. (a) If required by applicable law in
order to consummate the Merger, the Company shall take all action necessary in
accordance with the DGCL and its
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Restated Certificate of Incorporation and By-laws to convene a meeting of
stockholders of the Company as promptly as practicable following the execution
of this Agreement for the purpose of approving the Merger and this Agreement.
The date of any such stockholders' meeting shall be set by the Board of
Directors of the Company after consultation with, and on a date approved by,
Parent, whose approval shall not be unreasonably withheld. Unless otherwise
required by the fiduciary duty of the Board of Directors of the Company (as
determined by them in good faith after consultation with outside counsel), the
Board of Directors of the Company shall (i) recommend that the Company's
stockholders vote to approve the Merger and this Agreement if proxies are
solicited by the Company with respect to such vote, (ii) cause the Company to
use its best efforts to solicit from stockholders of the Company proxies in
favor of the Merger, unless, in accordance with applicable law and the
regulations of the New York Stock Exchange, such solicitation is not required
to achieve approval of the Merger (taking into account proxies granted by Santa
Fe and Prudential pursuant to the Securities Purchase Agreements), and (iii)
take all other action in their judgment necessary and appropriate to secure the
vote of stockholders required by the DGCL to effect the Merger. To the extent
required by the fiduciary obligations of the Board of Directors (as determined
by them in good faith after consultation with outside counsel), the Board of
Directors of the Company may, at any time prior to the Effective Time, withdraw
or modify its approval or recommendation to the Company's stockholders of the
Merger and this Agreement.
(b) In connection with the Merger, the Company shall
prepare a proxy statement pursuant to Regulation 14A under the Exchange Act or,
if applicable law and regulations of the New York Stock Exchange do not so
require, an information statement pursuant to Regulation 14C under the Exchange
Act, file such proxy statement and/or information statement with the SEC under
the Exchange Act as promptly as practicable and use all reasonable efforts to
have such proxy statement and/or information statement cleared by the SEC. If
requested by Parent, the Company will include in such proxy and/or information
statement a proposal (the "Series B Proposal") to the effect that the Surviving
Corporation's Certificate of Incorporation be amended, promptly following the
later of (i) consummation of the Merger or (ii) the vote of the Series B
Preferred stockholders upon such proposal (such later date being hereinafter
referred to as the "Outside Date"), to provide that the Scheduled Automatic
Conversion Date of the Series B Preferred be changed from December 14, 1995 to
a date specified by Parent within ten business days following the Outside Date.
Parent, Merger Sub and the Company shall cooperate with each other in the
preparation of the proxy statement and/or information statement, and the
Company shall notify Parent of the receipt of any comments of the SEC with
respect to the proxy statement and/or information statement and of any requests
by the SEC for any amendment or supplement thereto or for additional
information and shall provide to Parent promptly copies of all correspondence
between the Company or any representative of the Company and the SEC. The
Company shall give Parent and its counsel the opportunity to review the proxy
statement and/or information statement prior to its being filed with the SEC
and shall give Parent and its counsel the opportunity to review all amendments
and supplements to the proxy statement and/or information statement and all
responses to requests for additional information and replies to comments prior
to their being filed with, or sent to, the SEC. Each of the Company, Parent
and Merger Sub agrees to use its reasonable best efforts, after consultation
with the other parties hereto to respond promptly to all such comments of and
requests by the SEC. As promptly as practicable after the proxy statement
and/or information statement has been cleared by the SEC, the Company shall
mail
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the proxy statement and/or information statement to the stockholders of the
Company. The Company agrees that the proxy statement and/or information
statement and each amendment or supplement thereto at the time of mailing
thereof and (if applicable) at the time of the meeting of the stockholders of
the Company, will not include any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information furnished to the Company by Parent or Merger Sub
specifically for use in the proxy statement and/or information statement.
Parent and Merger Sub agree that the written information concerning Parent and
Merger Sub provided by them for inclusion in the proxy statement and/or
information statement and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the meeting of stockholders of the Company,
will not include an untrue statement of a material fact or omit to state a
material fact to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. No
amendment or supplement to the proxy statement and/or information statement
will be made by the Company without the approval of the Parent.
7.4 FILINGS; OTHER ACTION.
(a) Subject to the terms and conditions herein provided,
the Company and Parent shall: (i) promptly make their respective filings and
thereafter make any other required submissions under the HSR Act with respect
to the Merger; (ii) use all reasonable efforts to cooperate with one another in
(1) promptly determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (2) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (iii) use all reasonable efforts to take, or
cause to be taken, all other action and to do, or cause to be done, all other
things necessary, proper or appropriate to promptly consummate and make
effective the transactions contemplated by this Agreement. Each of Parent and
the Company will use all reasonable efforts to resolve such objections, if any,
as may be asserted with respect to the Merger under the HSR Act or other
antitrust laws. If, at any time after the Effective Time, any further action
is necessary or desirable to carry out the purpose of this Agreement, the
proper officers and directors of Parent and the Company shall take all such
necessary action.
(b) Prior to the Effective Time, the Company shall sell,
assign or otherwise transfer any interest of the Company or any Subsidiary or
affiliate thereof in the power generation facilities located at Chinese
Station, California to a third party not affiliated with the Company or Buyers
on terms which would not have a Material Adverse Effect.
7.5 INSPECTION OF RECORDS; ACCESS. From the date hereof to the
Effective Time, the Company shall allow all designated officers, attorneys,
accountants and other representatives or agents of Parent ("Parent's
Representatives") access at all reasonable times to all employees,
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offices, warehouses, and other facilities and to the records and files,
correspondence, audits and properties (whether owned or leased, or as to which
an easement in favor of the Company exists), as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs, of the Company and its Subsidiaries
including, without limitation, access to all properties of the Company (whether
owned or leased, or as to which an easement in favor of the Company exists) to
conduct such reasonable investigation of the business and properties of the
Company and its Subsidiaries as Parent deems appropriate; provided, however,
Parent's Representatives shall use reasonable efforts to avoid interfering
with, hindering or otherwise disrupting the employees of the Company in the
execution of their employment duties during any visit to, or inspection of, the
Company's facilities. Parent agrees that any written report regarding any such
environmental investigation shall be confidential and shall not be provided to
any third party, including any governmental authority, without the prior
written consent of the Company. Parent agrees to promptly provide the Company
with a copy of any such written environmental report.
7.6 PUBLICITY. Parent, the Company, Santa Fe and Prudential
shall, subject to their respective legal obligations (including requirements of
stock exchanges and other similar regulatory bodies), agree upon the text of
any press release relating to this Agreement or the transactions contemplated
hereby before issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby and in making
any filings with any federal or state governmental or regulatory agency or with
any national securities exchange with respect thereto.
7.7 FURTHER ACTION. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions to
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger
and the other transactions contemplated hereby.
7.8 EXPENSES. Except as set forth in Section 9.3(b) (under the
circumstances therein contemplated), whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses; provided, however, that if the Merger is consummated and the Merger
Expenses (as defined below) exceed $3,250,000, then (a) the amount of such
excess shall be reimbursed to the Surviving Corporation by Prudential on or
before ten days after the receipt by Prudential of a written request therefor
from the Surviving Corporation accompanied by documentation in reasonable
detail evidencing the total amount of expenses incurred, including such excess;
provided, however, in no event shall the amount required to be paid by
Prudential pursuant to this sub-clause (a) exceed $250,000; and (b) the amount
by which the Merger Expenses exceed $3,500,000 shall be reimbursed to the
Surviving Corporation by Santa Fe on or before ten days after the receipt by
Santa Fe of a written request therefor from the Surviving Corporation
accompanied by documentation in reasonable detail evidencing the total amount
of Merger Expenses, including such excess; and provided further, however, that
if the Securities Purchase Agreement among Parent, Merger Sub and Santa Fe is
terminated by Santa Fe pursuant to Section 7.2(d) thereof, the Company shall
reimburse Parent and Merger Sub for Parent's out-of-pocket expenses incurred in
connection with this Agreement and the transaction contemplated hereby, such
reimbursement not to exceed $1,500,000. Upon the reasonable request of
Prudential or Santa Fe, the Surviving Corporation shall provide additional
documentation to
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verify the accuracy of the information furnished to such party regarding the
expenses incurred by the Company or the Surviving Corporation. As used in this
Section 7.8, "Merger Expenses" shall mean the Option Cash-Out Amount, all
amounts due from the Company to Vinson & Elkins L.L.P., Akin, Gump, Strauss,
Hauer & Feld, L.L.P., Morris Nichols Arsht & Tunnel and Morris, James, Hitchens
& Williams for services rendered in connection with the Merger and the Lawsuit,
amounts due from the Company to S.G. Warburg & Co. Inc. for services rendered
in connection with the Merger (not to exceed $1,250,000 plus expenses), amounts
due from the Company to Dillon, Read & Co. Inc. for services rendered in
connection with the Merger (not to exceed $1,150,000), amounts due Elliot
Associates L.P. for services rendered in connection with the Merger (not to
exceed $75,000), amounts due in settlement of the Lawsuit and printing and
mailing costs and expenses incurred in connection with the Merger.
7.9 INDEMNIFICATION.
(a) Parent shall cause the Surviving Corporation to
indemnify each of the present and former officers, directors, employees and
agents of the Company and its Subsidiaries (the "Indemnified Parties") with
respect to his service in any such capacity or service at the request of the
Company or any of its Subsidiaries as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise in
regard to any matter, including the transactions contemplated hereby, occurring
at or prior to the Effective Time to the full extent permitted by the DGCL, the
Company's Certificate of Incorporation or Bylaws or indemnification agreements,
or the certificate of incorporation or bylaws of such Subsidiary, in each case
as in effect as of the date of this Agreement. Neither Parent nor the
Surviving Corporation shall amend such indemnification provisions currently
contained in the certificates of incorporation and bylaws of the Company and
its Subsidiaries (except as required by applicable law) if the amendments
effected thereby would diminish the Indemnified Parties' right of
indemnification.
(b) Parent shall cause the Surviving Corporation to use
its best efforts to cause to be maintained in effect for six years from the
later of the Effective Time or the expiration of the current policy (such later
date being herein referred to as the "Commencement Date"), the current policies
of directors' and officers' liability insurance maintained by the Company and
its Subsidiaries with respect to all matters, including the transactions
contemplated hereby, occurring prior to or at the Effective Time; provided,
however, the Surviving Corporation may substitute therefor policies of at least
the same coverage containing terms and conditions which are no less
advantageous to the insured officers and directors so long as no lapse in
coverage occurs as a result of such substitution; and provided further,
however, that, effective on the third anniversary of the Effective Time (or at
any time thereafter), the Surviving Corporation may substitute for such
policies an indemnity from Parent providing coverage no less advantageous to
the insured officers and directors so long as no lapse in coverage occurs as a
result of such substitution; if such substitution of an indemnity is effected,
the Surviving Corporation will provide to each such insured officer or director
so requesting a contract from Parent evidencing such indemnity.
(c) This Section 7.9 shall survive the closing of the
transactions contemplated hereby, is intended to benefit the Company and each
of the Indemnified Parties (each of whom shall be entitled to enforce this
Section 7.9 against the Surviving Corporation and Parent) and
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shall be binding on all successors and assigns of the Surviving Corporation and
Parent. If the Surviving Corporation or the Parent or any of their respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of Surviving
Corporation and/or Parent assume the obligations set forth in this Section 7.9.
7.10 CERTAIN BENEFITS.
(a) From and after the Effective Time, subject to
applicable law, Parent and Subsidiaries will honor in accordance with their
terms, all Company Benefit Plans; provided, however, that nothing herein shall
preclude any change effected on a prospective basis in any Company Benefit
Plan.
(b) The Surviving Corporation shall employ at the
Effective Time all employees of the Company and its Subsidiaries who are
employed on the Closing Date on terms consistent with the Company's current
employment practices and at comparable levels of compensation and positions.
Such employment shall be at will and Parent and the Surviving Corporation shall
be under no obligation to continue to employ any individuals.
7.11 SETTLEMENT OF LITIGATION. The parties hereto agree to use all
commercially reasonable efforts (a) to enter into a memorandum of understanding
or other appropriate agreement in a form and on terms reasonably acceptable to
the parties hereto, Prudential and Santa Fe (the "Memorandum of Understanding")
settling the lawsuit styled as Engel v. Hadson Corporation, et al., Civil
Action No. 13934 (the "Lawsuit"), pending in the Court of Chancery of the State
of Delaware in and for New Castle County (the "Court") and providing for, among
other things, (i) the approval by the litigants of the consideration to be paid
to holders of Common Stock pursuant to Section 4.1(b) hereof, (ii) payment of
fees and expenses of plaintiff's counsel and (iii) a release of each of the
defendants named therein, Parent, the Company, Santa Fe and Prudential and
their respective officers, directors, agents, employees and affiliates from any
and all claims by stockholders of the Company with respect to the Merger (the
"Settlement"), (b) as soon as practicable after the Memorandum of Understanding
is entered into, to cause (i) the stipulation of settlement or other
appropriate document having such effect contemplated by the Memorandum of
Understanding (which shall be in a form reasonably acceptable to the parties
hereto, Santa Fe and Prudential) to be filed in the Court, (ii) the Court to
certify the Lawsuit as a class action the members of which shall be all holders
of Common Stock (other than Santa Fe and Prudential), and in connection with
which the members of the class do not have the right to opt out or otherwise
elect not to participate in the Settlement and (iii) the Settlement to become
final and non-appealable.
7.12 NO AMENDMENT. Without the express written consent of the
Company, Parent and Merger Sub agree not to amend or modify either of the
Securities Purchase Agreements in any respect.
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<PAGE> 34
7.13 PAYMENT OF CERTAIN INDEBTEDNESS. Immediately prior to the
Effective Time, the Company shall pay to Prudential, as holder of the Company's
$56,400,000 original aggregate principal amount of 8% Senior Secured Notes due
2003 (the "8% Senior Secured Notes"), all interest accrued on the 8% Senior
Secured Notes from the last interest payment date on which interest was paid in
full to but not including the day on which the Effective Time shall occur.
ARTICLE VIII
CONDITIONS
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
(b) Neither of the parties hereto shall be subject to any
order or injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement.
(c) The Board of Directors of the Company shall have
received from Dillon, Read & Co. Inc. confirmation, as of the date of the proxy
or information statement relating to the Merger, of its opinion described in
Section 5.18.
(d) This Agreement and the Merger shall have been
approved by the stockholders of the Company in accordance with the DGCL and the
Company's Restated Certificate of Incorporation and By-laws.
(e) The Lawsuit shall have been certified as a class
action as provided for in Section 7.11 hereof, the members of which shall not
have opt out rights or the right to otherwise elect not to participate therein,
and the Settlement shall have been approved and become final and
non-appealable.
8.2 CONDITION TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following condition:
(a) Parent and Merger Sub shall have performed in all
material respects their respective agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the
representations and warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct as of the date of this Agreement and
(unless made as of a specified date) as of the Closing Date, with the same
force and effect as if made at, and effective as of, such date; and the Company
shall have received a certificate of the President or a Vice President of
Parent and Merger Sub, dated the Closing Date, certifying to such effect.
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<PAGE> 35
(b) The Company shall have received from Gardner Carton &
Douglas, counsel to Parent and Merger Sub, an opinion covering the matters set
forth on Exhibit A hereto.
8.3 CONDITIONS TO OBLIGATION OF PARENT AND MERGER SUB TO EFFECT
THE MERGER. The obligations of Parent and Merger Sub to effect the Merger
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(a) The Company shall have performed in all material
respects its agreements contained in this Agreement required to be performed on
or prior to the Closing Date and the representations and warranties of the
Company contained in this Agreement shall be true and correct as of the date of
this Agreement and (unless made as of a specified date) as of the Closing Date,
with the same force and effect as if made at, and effective as of, such date
(provided, however, in addition, that each representation and warranty in
Section 5.12, Section 5.14(d), (e), (f), (g), (h), (i) and (k), Section 5.16,
Section 5.17, Section 5.20, Section 5.22 or Section 5.23 shall be deemed to be
untrue or incorrect as of either such date only to the extent that the
inaccuracies of such representation and warranty would reasonably be expected
to have a Material Adverse Effect), and Parent shall have received a
certificate of the Company, dated the Closing Date, certifying to all of the
foregoing.
(b) All necessary governmental and third party consents
required in connection with the transactions contemplated by this Agreement
shall have been obtained and there shall be no action, suit or proceeding
pending or threatened against the Company, the Parent or any of their
subsidiaries which would reasonably be expected to prevent or delay the
transactions contemplated by this Agreement or either of the Securities
Purchase Agreements or result in material damages in connection herewith or
therewith.
(c) Parent and Merger Sub shall have entered into the
Securities Purchase Agreements and all conditions to the obligations of Parent
and Merger Sub to close the transactions contemplated thereby shall have been
satisfied or waived.
(d) Parent and Merger Sub shall have received from Akin,
Gump, Strauss, Hauer & Feld, L.L.P., counsel to the Company, an opinion
covering the matters set forth on Exhibit B hereto.
(e) On the date of commencement of mailing to the
Company's stockholders of the proxy or information statement with respect to
the Merger and immediately prior to the Effective Time, Parent and Merger Sub
shall have received a letter customary in form and substance in transactions of
this type, dated the date of such mailing and the date of the Effective Time,
respectively, and reasonably satisfactory to them, from Price Waterhouse,
independent public accountants for the Company, in connection with such
accountants' review of certain financial matters regarding the Company and its
Subsidiaries contained in such proxy or information statement.
(f) All Company Options shall have been cancelled and
terminated by the Compensation Committee of the Board of Directors of the
Company.
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<PAGE> 36
(g) Except as disclosed in the Company Reports filed with
the SEC prior to the date of this Agreement or in the Company Disclosure
Letter, since December 31, 1993, there shall not have occurred any event or
change with respect to the Company and its Subsidiaries having or which would
be reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
ARTICLE IX
TERMINATION
9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by the mutual written consent of Parent and the Company.
9.2 TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement
may be terminated and the Merger may be abandoned by Parent or the Company if
(a) all conditions to consummation of the Merger shall not have been satisfied
or waived and the Merger shall not have been consummated by June 30, 1995, or
(b) a United States federal or state court of competent jurisdiction or United
States federal or state governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to clause (b) of this
Section 9.2 shall have used all reasonable efforts required by this Agreement
to remove such injunction, order or decree.
9.3 TERMINATION BY THE COMPANY.
(a) This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time by the Company, if there
has been a breach by Parent or Merger Sub of any representation or warranty
contained in this Agreement which would have a Parent Material Adverse Effect.
(b) In addition, this Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by the Company
if, in the judgment of the Committee, such action may be required for the Board
of Directors to comply with its fiduciary duties to the Company and its
stockholders; provided, however, if such action is taken by the Company, the
Company shall pay to Parent $1,500,000 as reimbursement to Parent for Parent's
expenses incurred in connection with the transactions contemplated by this
Agreement (for which Parent shall not be required to account); and provided
further, however, that if, following such action, the Company shall consummate
any transaction pursuant to a Takeover Proposal (i) within 15 months following
the date of this Agreement or (ii) thereafter pursuant to a definitive
agreement executed by the Company during such 15-month period, the Company
shall also pay to Parent $3,500,000 promptly upon the occurrence of such
transaction.
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<PAGE> 37
9.4 TERMINATION BY PARENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by the
Parent, if there is any inaccuracy in any representation or warranty of the
Company contained in this Agreement which would reasonably be expected to have
a Material Adverse Effect.
9.5 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically upon any termination of the Securities Purchase Agreement among
Parent, Merger Sub and Santa Fe pursuant to Section 7.2(d) thereof.
9.6 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to
this Article 9, all obligations of the parties hereto shall terminate, except
the obligations of the parties pursuant to this Section 9.6, Sections 7.8 and
9.3(b), the last two sentences of Section 7.5 and the Confidentiality Agreement
referred to in Section 10.4. Moreover, in the event of termination of this
Agreement, nothing herein shall prejudice the ability of the non-breaching
party from seeking damages from any other party for any breach of this
Agreement, including without limitation, attorneys' fees and the right to
pursue any remedy at law or in equity.
9.7 EXTENSION; WAIVER. At any time prior to the Effective Time,
any party hereto may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreements on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by or on behalf of the party granting such
extension or waiver.
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; CONSEQUENCES OF
INACCURACY. Unless this Agreement has previously been terminated pursuant to
Article IX, the representations and warranties and covenants made in this
Agreement shall terminate at the Closing, except that any covenant herein which
by its terms contemplates performance after the Closing Date shall survive the
Closing Date for the period contemplated thereby. Prior to Closing, inaccuracy
of a representation or warranty made in this Agreement shall serve as a basis
for monetary liability of any party to this Agreement to another only if made
with actual knowledge of such inaccuracy and only to the extent that such
inaccuracy would reasonably be expected to have a Material Adverse Effect (in
the case of a representation or warranty of the Company) or Parent Material
Adverse Effect (in the case of a representation or warranty of Parent or Merger
Sub); otherwise, inaccuracy of a representation or warranty shall serve only as
a basis for termination of the Agreement or refusal to close in accordance with
Sections 9.3(a), 9.4, 8.2(a) or 8.3(a).
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<PAGE> 38
10.2 NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
<TABLE>
<S> <C>
If to the Company: If to Parent or Merger Sub:
Hadson Corporation LG&E Energy Corp.
2777 Stemmons Freeway 220 West Main Street
Suite 700 P.O. Box 32030
Dallas, Texas 75207 Louisville, Kentucky 40202
Attention: President Attention: President
Fax: (214) 640-6932 Fax: (502) 627-2995
With a copy to: With a copy to
Hadson Corporation LG&E Energy Corp.
2777 Stemmons Freeway 220 West Main Street
Suite 700 P.O. Box 32030
Dallas, Texas 75207 Louisville, Kentucky 40202
Attention: General Counsel Attention: General Counsel
Fax: (214) 640-6801 Fax: (502) 627-2585
</TABLE>
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
10.3 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement
nor any of the rights interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties and any purported assignment
without such prior written consent of the other parties shall be void;
provided, however, that Parent may assign this Agreement to any of its
subsidiaries or affiliates whether or not such subsidiaries or affiliates exist
at the date hereof; provided, further, that no such assignment shall relieve
Parent of any of its obligations hereunder. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, except
for the provisions of Section 7.8 or 7.9, which are expressly intended to be
enforceable by the beneficiaries thereof, nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto
or their respective heirs, successors, executors, administrators and assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
10.4 ENTIRE AGREEMENT. This Agreement, the Company Disclosure
Letter, the Securities Purchase Agreements and the Confidentiality Agreement
dated December 28, 1994, between the Company and Parent constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings (oral and written) among the
parties with respect thereto. No addition to or modification of any provision
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<PAGE> 39
of this Agreement shall be binding upon any party hereto unless made in writing
and signed by all parities hereto.
10.5 AMENDMENT. This Agreement may be amended by the parties
hereto only by an instrument in writing signed by or on behalf of each of the
parties hereto.
10.6 GOVERNING LAW; CHOICE OF FORUM.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws.
(b) Each of the parties hereto irrevocably (i) agrees
that any legal suit, action or proceeding brought by any of the parties hereto
against another arising out of or based upon this Agreement or the transaction
contemplated hereby may be instituted in any state or federal court located in
the State of Delaware, (ii) waives, to the fullest extent it may effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any such proceeding and (iii) submits to the exclusive jurisdiction of such
courts in any such suit, action or proceeding.
10.7 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies of
this Agreement, each of which may be signed by less than all of the parties
hereto, but together all such copies are signed by all of the parties hereto.
10.8 HEADINGS. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
10.9 INTERPRETATION. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
10.10 WAIVERS. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provisions hereunder.
10.11 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or otherwise affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any
provisions of this
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<PAGE> 40
Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf as of the day and year
first written above.
LG&E ENERGY CORP.
By: /s/ EDWARD J. CASEY, JR.
__________________________________
Name: Edward J. Casey, Jr.
Title: Group President, LG&E Energy
Services, LG&E Energy Corp.
CAROUSEL ACQUISITION CORPORATION
By: /s/ EDWARD J. CASEY, JR.
__________________________________
Name: Edward J. Casey, Jr.
Title: President
HADSON CORPORATION
By: /s/ GREG G. JENKINS
__________________________________
Name: Greg G. Jenkins
Title: President and Chief Executive
Officer
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<PAGE> 41
EXHIBIT A
The opinion of Gardner, Carton & Douglas, counsel to Parent and Merger
Sub shall be substantially to the following effects:
1. Each of Parent and Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of Parent and Merger Sub is duly licensed
or qualified to do business as a foreign corporation and is in good standing
under the laws of each other state of the United States in which the character
of the properties owned or leased by it therein or in which the transaction of
its business makes such qualification necessary, except where the failure to be
so licensed or qualified or be in good standing would not have a material
adverse effect on the ability of Parent or Merger Sub to perform its respective
obligations under the Merger Agreement (a "Parent Material Adverse Effect").
Parent has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted. Merger Sub
was incorporated on January 30, 1995, and, to such counsel's knowledge, since
its incorporation Merger Sub has not conducted any business activities except
in connection with the transactions contemplated in this Agreement.
2. Each of Parent and Merger Sub has the requisite corporate
power and authority to execute and deliver the Merger Agreement and all
agreements and documents contemplated thereby, and the consummation by Parent
and Merger Sub of the transactions contemplated thereby has been duly
authorized by all requisite corporate action. The Merger Agreement
constitutes, and all agreements and documents contemplated thereby (when
executed and delivered pursuant thereto for value received) will constitute,
the valid and legally binding obligations of Parent and Merger Sub, enforceable
against each of them in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
3. Neither the execution and delivery by Parent and Merger Sub of
the Merger Agreement, nor the consummation by Parent and Merger Sub of the
transactions contemplated thereby in accordance with the terms thereof, will:
(1) result in a breach of any provisions of the Certificate of Incorporation or
By-laws of Parent or Merger Sub; (2) violate or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or give rise to any payments or compensation under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of Parent or Merger Sub under, or result in being
declared void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Parent or Merger Sub is a party,
or by which Parent or Merger Sub or any of their properties is bound or
affected, except for any of the foregoing matters which would not, individually
or in the aggregate, have a Parent Material Adverse Effect and will not impose
any liability on the Company; (3) violate any order, writ, injunction, decree,
law, statute, rule or regulation applicable to Parent or Merger Sub or any of
their respective property or assets of which were are aware (after consultation
with Parent's General Counsel), except for violations which would not
individually or in the aggregate, have a Parent Material Adverse Effect; or
<PAGE> 42
(4) based upon the representation and warranty of the Company made in Section
5.19 and compliance by the Company with Section 7.4, require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority (other than the Regulatory
Filings), or any other person or entity, the failure to obtain or make which
would have, individually or in the aggregate, a Parent Material Adverse Effect.
<PAGE> 43
EXHIBIT B
The opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., special
counsel to the Company, shall be substantially to the following effects:
1. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company is duly licensed or qualified to do business as a foreign corporation
and is in good standing under the laws of each other state of the United States
in which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary
[relying as to factual matters in support thereof solely upon an Officer's
Certificate of the Company], except where the failure to be so licensed or
qualified or be in good standing would not reasonably be expected to have a
Material Adverse Effect. The Company has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted.
2. The Company has the requisite corporate power and authority to
execute and deliver the Merger Agreement and all agreements and documents
contemplated thereby. The Company Board Approval as well as all approvals of
the stockholders of the Company required under the DGCL, the charter and bylaws
of the Company and the Merger Agreement have been duly obtained and remain in
full force and effect and constitute all requisite corporate action on the part
of the Company necessary for the consummation by the Company of the
transactions contemplated by the Merger Agreement. The Merger Agreement
constitutes the valid and legally binding obligation of the Company. The
Company Board Approval constitutes all necessary action to approve the
transactions contemplated by the Merger Agreement and the Securities Purchase
Agreements pursuant to Section 203(a) of the DGCL.
3. The authorized capital stock of the Company is as set forth in
Section 5.4 of the Merger Agreement.
4. Each of Hadson Gas Systems, Inc. ("Gas Systems"); Llano, Inc.
("Llano"); Minerals, Inc. ("Minerals"); Western Natural Gas and Transmission
Corporation ("Western"); Hadson Gas Co. ("Gas Co."); Hadson Gas Marketing Co.
("Gas Marketing") and Hadson Gas Gathering & Processing Co. ("Hadson Gas
Processing") is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, has the corporate
power and authority to own its properties and to carry on its business as it is
now being conducted, and is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of each other state
of the United States in which the character of the properties owned or leased
by it therein or in which the transaction of its business makes such
qualification necessary [relying as to factual matters in support thereof
solely upon an Officer's Certificate from each of such companies], except where
the failure to be so licensed or qualified would not reasonably be expected to
have a Material Adverse Effect. To the Opinion Giver's Knowledge, all of the
outstanding stock of Gas Systems, Llano, Minerals, Western Gas Co., Gas
Marketing and Hadson Gas Processing is owned directly or indirectly by the
Company free and clear of all liens, pledges, security interests, claims or
other encumbrances.
<PAGE> 44
5. Neither the execution and delivery by the Company of the
Merger Agreement nor the consummation by the Company of the Merger Agreement in
accordance with its terms:
a. contravenes or results in a breach of any provision of the
certificate of incorporation or by-laws (or similar governing
documents) of the Company;
b. violates, or constitutes a default under, or permits the
termination of, any agreement, contract, lease or other
commitment of the Company filed as an Exhibit to any Company
Report filed by the Company with the SEC after December 31,
1993, other than as set forth in the Disclosure Letter or as
set forth in Schedule 1 [to be attached to this opinion at the
time of delivery].
c. to the Opinion Giver's Knowledge, violates any order, writ,
injunction, decree, law, statute, rule or regulation
applicable to the Company or any of its properties or assets,
except for violations which would not reasonably be expected
to have a Material Adverse Effect or to prevent or delay
consummation of the transactions contemplated by the Merger
Agreement.
d. other than the filings provided for in Article I of the Merger
Agreement and filings required under the HSR Act or the
Exchange Act (collectively the "Regulatory Filings"), require
any consent, approval or authorization of, or declaration,
filing or registration with, any domestic, governmental or
regulatory authority, or any other person or entity, which has
not been obtained or made except for those the failure to
obtain or make would not reasonably be expected to have a
Material Adverse Effect or prevent or delay consummation of
the transactions contemplated by the Merger Agreement.
6. To the Opinion Giver's Knowledge, there is no litigation,
proceeding or governmental investigation pending or threatened against or
relating to the Company, any of its subsidiaries or any of their respective
properties which questions the validity of, or seeks damages in connection
with, the Merger Agreement or, except as set forth in the Disclosure Letter,
which, if determined adversely to the Company or its subsidiaries, would result
in a Material Adverse Effect on the Company.
7. The Company is not (a) an "investment company" or, to the
Opinion Giver's Knowledge, a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or (b) a
"holding company" or, to the Opinion Giver's Knowledge, a "subsidiary company"
of a "holding company" or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
2
<PAGE> 45
8. The statements in the definitive Proxy Statement or
Information Statement delivered to the stockholders of the Company in
connection with the Merger under the caption "Merger Agreement" [or other
caption employed under which the Merger Agreement and the transactions
contemplated thereby are summarized or described], insofar as such statements
purport to summarize the provisions of the Merger Agreement and the
transactions contemplated thereby , fairly summarize or describe such
provisions of the Merger Agreement in all material respects.
3
<PAGE> 1
Exhibit 3.03
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
HADSON CORPORATION
* * * * *
Hadson Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of said
corporation, said Board of Directors adopted a resolution proposing and
declaring advisable the following amendment to the Restated Certificate of
Incorporation of said corporation:
RESOLVED, that, in the judgment of the Board, it is deemed
advisable to amend the Company's Restated Certificate of Incorporation
(the "Restated Certificate") so as to increase the number of shares of
Common Stock which, along with the preferred stock, constitute the
capital stock of the Company, and for that purpose to change the first
paragraph of Article 4 of the Restated Certificate to read as follows:
The total number of shares of capital stock of all
classes which the Corporation shall have authority to
issue is 75,000,000, which shall consist of (i)
25,000,000 shares of preferred stock, par value $.01
per share ("Preferred Stock"), and (ii) 50,000,000
shares of Common Stock, par value $.01 per share
("Common Stock").
SECOND: That the aforesaid amendment was duly adopted by the
stockholders of said corporation at a meeting thereof held in accordance with
the provisions of Section 222 of the General Corporation Law of the State of
Delaware.
THIRD: That the aforesaid amendment was adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
<PAGE> 2
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by Robert P. Capps, its Executive Vice President, this 21st day of
November, 1994.
HADSON CORPORATION
By: /s/ ROBERT P. CAPPS
Robert P. Capps,
Executive Vice President
-2-
<PAGE> 1
Exhibit 10.05
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made and entered into
effective November 10, 1994 by and between Hadson Corporation, a Delaware
corporation (the "Company") and James Ervin Cannon ("Employee").
W I T N E S S E T H
WHEREAS, the Company and Employee entered into that certain Employment
Agreement effective as of March 31, 1994 (the "Employment Agreement"); and
WHEREAS, the Company and Employee desire to amend the Employment
Agreement as hereinafter provided;
NOW THEREFORE, for and in consideration of the mutual promises,
covenants and considerations herein and other good and valuable considerations,
the Company and Employee do hereby agree as follows:
1. Paragraphs (b) and (c) of Section 4.2 of Article 4. of the
Employment Agreement are deleted in their entirety and the
following is substituted therefor:
(b) If Employee's employment hereunder is
terminated (i) by the company in breach of this
Agreement or (ii) by Employee pursuant to paragraph
2.3 hereof, then (A) all compensation and all
benefits to Employee hereunder shall cease and
terminate contemporaneously with such termination of
employment, except that all health and dental
benefits available to Employee under the Company's
group health and dental plans as of the date of such
termination shall continue to be made available to
Employee for a period of three years (the "Health
Continuation Period") following such termination, (B)
Employee shall be entitled to receive his base salary
and vacation earned but not taken through the date of
such termination, together with the full amount of
any bonus that would have been payable to him for the
year in which such termination occurred pursuant to
the Incentive Compensation Plan had he been employed
by the Company at the end of such year, and (C)
Employee shall be entitled to be paid a payment in
settlement of all claims equal to two times the total
of (x) the amount of his highest annual base salary
plus (y) an amount equal to the annual bonus for
which Employee would be eligible assuming 100% of the
bonus had been earned for the year in which such
termination occurred.
<PAGE> 2
Nothing herein shall operate to reduce, or be
construed as reducing, Employee's (or a
beneficiary's) group health plan continuation rights
under COBRA in any manner, and upon the end of the
Health Continuation Period Employee (or Employee's
beneficiary(ies)), if otherwise eligible, will be
entitled to elect COBRA continuation coverage for the
full period applicable as if that were Employee's
termination date. In the event Employee becomes
covered by another employer's group health plan
during the Health Continuation Period, the Company's
group health plan shall be liable for benefits only
to the extent such benefits are not covered by the
subsequent employer's group health plan.
In addition to the above, the Company shall
at all times during the 24--month period following
the date of termination maintain in full force and
effect for the continued benefit of Employee and
Employee's eligible dependents all life insurance
benefits available to Employee and Employee's
eligible dependents by virtue of being an employee of
the Company immediately prior to such termination,
provided that Employee's continued participation is
possible under the general terms and provisions of
such plans and programs (or any successor thereto).
In the event that participation by Employee in any
such plan or program after the date of termination is
barred pursuant to the terms thereof, the Company
shall obtain comparable coverage under individual
policies for Employee (and Employee's dependents).
The Employee shall be required to contribute to the
cost of such policies only the amounts which Employee
would have been required to pay had he or she
remained in the employ of the Company.
(c) As a condition to the receipt of any
payment under paragraph 4.2(b) hereof, Employee shall
first execute a release, in the form established by
the Company, releasing and forever discharging the
Company and its affiliates and the officers,
directors, employees and agents of the Company and
its affiliates from any and all claims and from any
and all causes of action of any kind or character,
including but not limited to all claims or causes of
action arising out of Employee's employment with the
Company (or any of its affiliates) or the termination
of such employment and expressly including, but not
limited to any such claims or causes of action based
on the Age Discrimination In Employment Act, the
Americans with Disabilities Act and the provisions of
the Texas Commission on Human Rights Act that
prohibits discrimination on account of age or
disability, or any other act that prohibits
discrimination on the basis of sex or race. If
Employee is entitled to and receives the payments
provided under paragraph 4.2(b) hereof, performance
of the obligations of the Company thereunder will
constitute full settlement of all claims that
Employee might otherwise
-2-
<PAGE> 3
assert against the Company or its affiliates on
account of the termination of the employment
relationship.
2. Except as herein changed and amended, the Employment Agreement
shall continue in full force and effect as heretofore written.
3. This agreement shall be binding upon the parties hereto and
upon their respective successors, heirs and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
effective as of the date first hereinabove written.
HADSON CORPORATION
/s/ GREG G. JENKINS
By: Greg G. Jenkins
President and
Chief Executive Officer
/s/ JAMES ERVIN CANNON
James Ervin Cannon
-3-
<PAGE> 1
Exhibit 10.06
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made and entered into
effective November 10, 1994 by and between Hadson Corporation, a Delaware
corporation (the "Company") and Greg G. Jenkins ("Employee").
W I T N E S S E T H
WHEREAS, the Company and Employee entered into that certain Employment
Agreement effective as of March 31, 1994 (the "Employment Agreement"); and
WHEREAS, the Company and Employee desire to amend the Employment
Agreement as hereinafter provided;
NOW THEREFORE, for and in consideration of the mutual promises,
covenants and considerations herein and other good and valuable considerations,
the Company and Employee do hereby agree as follows:
1. Paragraphs (b) and (c) of Section 4.2 of Article 4. of the
Employment Agreement are deleted in their entirety and the
following is substituted therefor:
(b) If Employee's employment hereunder is
terminated (i) by the company in breach of this
Agreement or (ii) by Employee pursuant to paragraph
2.3 hereof, then (A) all compensation and all
benefits to Employee hereunder shall cease and
terminate contemporaneously with such termination of
employment, (B) Employee shall be entitled to receive
his base salary and vacation earned but not taken
through the date of such termination, together with
the full amount of any individual bonuses or
incentive compensation that would have been payable
to him for the year in which such termination
occurred pursuant to the terms of the applicable
bonus or incentive compensation plan had he been
employed by the Company at the end of such year, and
(C) Employee shall be entitled to be paid a payment
in settlement of all claims equal to two times the
total of (x) the amount of his highest annual base
salary plus (y) an amount equal to the annual bonus
for which Employee would be eligible assuming 100% of
the bonus had been earned for the year in which such
termination occurred.
In addition to the above, the Company shall
at all times during the 24--month period following
the date of termination (the "Continuation Period")
maintain in full force and effect for the continued
benefit of Employee and Employee's eligible
dependents all life and medical and dental insurance
benefits available to Employee and Employee's
eligible dependents by virtue of being an employee of
the Company immediately
<PAGE> 2
prior to such termination, provided that Employee's
continued participation is possible under the general
terms and provisions of such plans and programs (or
any successor thereto). In the event that
participation by Employee in any such plan or program
after the date of termination is barred pursuant to
the terms thereof, the Company shall obtain
comparable coverage under individual policies for
Employee (and Employee's dependents). The Employee
shall be required to contribute to the cost of such
policies only the amounts which Employee would have
been required to pay had he or she remained in the
employ of the Company. Nothing herein shall operate
to reduce, or be construed as reducing, Employee's
(or a beneficiary's) group health plan continuation
rights under COBRA in any manner, and upon the end of
the Continuation Period Employee (or Employee's
beneficiary(ies)), if otherwise eligible, will be
entitled to elect COBRA continuation coverage for the
full period applicable as if that were Employee's
termination date. In the event Employee becomes
covered by another employer's group health plan
during the Continuation Period, the Company's group
health plan shall be liable for benefits only to the
extent such benefits are not covered by the
subsequent employer's group health plan.
(c) As a condition to the receipt of any
payment under paragraph 4.2(b) hereof, Employee shall
first execute a release, in the form established by
the Company, releasing and forever discharging the
Company and its affiliates and the officers,
directors, employees and agents of the Company and
its affiliates from any and all claims and from any
and all causes of action of any kind or character,
including but not limited to all claims or causes of
action arising out of Employee's employment with the
Company (or any of its affiliates) or the termination
of such employment and expressly including, but not
limited to any such claims or causes of action based
on the Age Discrimination In Employment Act, the
Americans with Disabilities Act and the provisions of
the Texas Commission on Human Rights Act that
prohibits discrimination on account of age or
disability, or any other act that prohibits
discrimination on the basis of sex or race. If
Employee is entitled to and receives the payments
provided under paragraph 4.2(b) hereof, performance
of the obligations of the Company thereunder will
constitute full settlement of all claims that
Employee might otherwise assert against the Company
or its affiliates on account of the termination of
the employment relationship.
2. Except as herein changed and amended, the Employment Agreement
shall continue in full force and effect as heretofore written.
-2-
<PAGE> 3
3. This agreement shall be binding upon the parties hereto and
upon their respective successors, heirs and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
effective as of the date first hereinabove written.
HADSON CORPORATION
/s/ ROBERT P. CAPPS
By: Robert P. Capps
Executive Vice President,
Chief Financial Officer and
Treasurer
/s/ GREG G. JENKINS
Greg G. Jenkins
-3-
<PAGE> 1
Exhibit 10.07
AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made and entered into
effective November 10, 1994 by and between Hadson Corporation, a Delaware
corporation (the "Company") and Robert P. Capps ("Employee").
W I T N E S S E T H
WHEREAS, the Company and Employee entered into that certain Amended
and Restated Employment Agreement effective as of March 31, 1994 (the
"Employment Agreement"); and
WHEREAS, the Company and Employee desire to amend the Employment
Agreement as hereinafter provided;
NOW THEREFORE, for and in consideration of the mutual promises,
covenants and considerations herein and other good and valuable considerations,
the Company and Employee do hereby agree as follows:
1. Paragraphs (b) and (c) of Section 4.2 of Article 4. of the
Employment Agreement are deleted in their entirety and the
following is substituted therefor:
(b) If Employee's employment hereunder is
terminated (i) by the company in breach of this
Agreement or (ii) by Employee pursuant to paragraph
2.3 hereof, then (A) all compensation and all
benefits to Employee hereunder shall cease and
terminate contemporaneously with such termination of
employment, (B) Employee shall be entitled to receive
his base salary and vacation earned but not taken
through the date of such termination, together with
the full amount of any individual bonuses or
incentive compensation that would have been payable
to him for the year in which such termination
occurred pursuant to the terms of the applicable
bonus or incentive compensation plan had he been
employed by the Company at the end of such year, and
(C) Employee shall be entitled to be paid a payment
in settlement of all claims equal to two times the
total of (x) the amount of his highest annual base
salary plus (y) an amount equal to the annual bonus
for which Employee would be eligible assuming 100% of
the bonus had been earned for the year in which such
termination occurred.
In addition to the above, the Company shall
at all times during the 24--month period following
the date of termination (the "Continuation Period")
maintain in full force and effect for the continued
benefit of Employee and Employee's eligible
dependents all life and medical and dental insurance
benefits available to Employee and Employee's
eligible
<PAGE> 2
dependents by virtue of being an employee of the
Company immediately prior to such termination,
provided that Employee's continued participation is
possible under the general terms and provisions of
such plans and programs (or any successor thereto).
In the event that participation by Employee in any
such plan or program after the date of termination is
barred pursuant to the terms thereof, the Company
shall obtain comparable coverage under individual
policies for Employee (and Employee's dependents).
The Employee shall be required to contribute to the
cost of such policies only the amounts which Employee
would have been required to pay had he or she
remained in the employ of the Company. Nothing
herein shall operate to reduce, or be construed as
reducing, Employee's (or a beneficiary's) group
health plan continuation rights under COBRA in any
manner, and upon the end of the Continuation Period
Employee (or Employee's beneficiary(ies)), if
otherwise eligible, will be entitled to elect COBRA
continuation coverage for the full period applicable
as if that were Employee's termination date. In the
event Employee becomes covered by another employer's
group health plan during the Continuation Period, the
Company's group health plan shall be liable for
benefits only to the extent such benefits are not
covered by the subsequent employer's group health
plan.
(c) As a condition to the receipt of any
payment under paragraph 4.2(b) hereof, Employee shall
first execute a release, in the form established by
the Company, releasing and forever discharging the
Company and its affiliates and the officers,
directors, employees and agents of the Company and
its affiliates from any and all claims and from any
and all causes of action of any kind or character,
including but not limited to all claims or causes of
action arising out of Employee's employment with the
Company (or any of its affiliates) or the termination
of such employment and expressly including, but not
limited to any such claims or causes of action based
on the Age Discrimination In Employment Act, the
Americans with Disabilities Act and the provisions of
the Texas Commission on Human Rights Act that
prohibits discrimination on account of age or
disability, or any other act that prohibits
discrimination on the basis of sex or race. If
Employee is entitled to and receives the payments
provided under paragraph 4.2(b) hereof, performance
of the obligations of the Company thereunder will
constitute full settlement of all claims that
Employee might otherwise assert against the Company
or its affiliates on account of the termination of
the employment relationship.
2. Except as herein changed and amended, the Employment Agreement
shall continue in full force and effect as heretofore written.
<PAGE> 3
3. This agreement shall be binding upon the parties hereto and
upon their respective successors, heirs and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
effective as of the date first hereinabove written.
HADSON CORPORATION
/s/ GREG G. JENKINS
By: Greg G. Jenkins
President and
Chief Executive Officer
/s/ ROBERT P. CAPPS
Robert P. Capps
-3-
<PAGE> 1
EXHIBIT 10.08
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective as of
July 18, 1994 (the "Effective Date") by and between Hadson Corporation, a
Delaware corporation (the "Company"), and Thomas W. Pounds ("Employee").
W I T N E S S E T H
WHEREAS, the Company desires to employ Employee in an executive
capacity on the terms and conditions, and for the consideration, hereinafter
set forth for the period provided herein commencing upon the Effective Date,
and Employee desires to be employed with the Company on such terms and
conditions and for such consideration;
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, the Company and Employee agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment. The Company agrees to employ Employee and
Employee agrees to be employed by the Company, beginning as of the Effective
Date and continuing for the period of time set forth in Article 2 of this
Agreement, on and subject to the terms and conditions of this Agreement.
1.2 Positions and Duties. The Company shall maintain Employee in
the positions of Vice President, Legal Affairs, and General Counsel, or in such
other positions as the parties hereto mutually may agree. Employee agrees (a)
to serve in the positions referred to in the preceding sentence as well as in
such additional executive officer positions of the Company or any of its
affiliates to which Employee is elected from time to time and (b) to perform
diligently and to the best of his abilities the duties and services
appertaining to such offices as set forth in the bylaws of the Company or such
affiliate, as the case may be, as the same may be amended from time to time, as
well as such additional duties and services which the parties hereto mutually
may agree upon from time to time or, subject to paragraph 2.3(a)(iii) hereof,
which the Board of Directors of the Company (the "Board of Directors") or of
such affiliate may prescribe. Employee shall at all times comply with and be
subject to such policies and procedures as the Company may establish from time
to time that are applicable to executive officers of the Company.
1.3 Other Activities. During the period of his employment by the
Company, Employee shall devote his primary business time, energy and best
efforts to the business and
<PAGE> 2
affairs of the Company and its affiliates and shall not engage, directly or
indirectly, in any other business or businesses, whether or not similar to that
of the Company or its affiliates, except with the consent of the Board of
Directors or except to the extent that the Board of Directors or such affiliate
may prescribe, or induce any employee of the Company or any affiliate to
terminate his or her employment with the Company or such affiliate except on
behalf of the Company or such affiliate. The parties recognize and agree that
Employee may engage in passive personal investments and other activities that
do not conflict with the business and affairs of the Company or its affiliates
or interfere with Employee's performance of his duties hereunder.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Term. Unless sooner terminated pursuant to other provisions
hereof, the Company shall employ Employee for a term beginning on the Effective
Date and ending on the second anniversary of the Effective Date. On each
anniversary of the Effective Date, commencing with the second anniversary of
the Effective Date, the term of this Agreement shall be extended automatically
for successive one-year periods unless on or prior to the January 18th
immediately preceding the last day of any such one-year period either the
Compensation Committee of the Board of Directors, on behalf of the Company, or
Employee shall give written notice to the other that no such automatic
extension shall occur, in which event this Agreement shall terminate on the
last day of such one-year period. Unless such notice shall specify that
Employee's employment with the Company shall terminate on the date of such
termination of this Agreement, the employment relationship between the Company
and Employee shall continue at-will following such termination.
Notwithstanding the preceding provisions of this paragraph, the term of
Employee's employment hereunder shall terminate upon his death.
2.2 Termination by the Company. The Company shall have the right
to terminate Employee's employment under this Agreement at any time prior to
the termination of this Agreement pursuant to paragraph 2.1 hereof for any of
the following reasons and only for the following reasons:
(a) Employee's continuing disability, which for purposes of
this Agreement shall mean Employee's becoming incapacitated by
accident, sickness or other circumstance which renders him mentally or
physically incapable, with reasonable accommodation (within the
meaning of the Americans with Disabilities Act of 1990, as amended),
of performing the essential functions of the duties and services
required of him hereunder for a
<PAGE> 3
period of more than 90 consecutive days during any 12-month period;
(b) for cause, which for purposes of this Agreement shall mean
any of the following, in each case as determined in good faith by the
Board of Directors in its sole discretion: (i) Employee's gross
negligence or willful misconduct in performance of the duties and
services required of him pursuant to this Agreement; (ii) the willful
and continued failure by Employee to follow the reasonable
instructions of the Board of Directors after written notice of such
failure has been given to Employee by the Board of Directors; (iii)
the willful commission by Employee of acts that are dishonest and
demonstrably and materially injurious to the Company, monetarily or
otherwise; or (iv) Employee's final conviction of a felony or of a
misdemeanor involving moral turpitude; or
(c) Employee's material breach of any material provision of
this Agreement which, if correctable, remains uncorrected for 30 days
following written notice to Employee by the Company of such breach;
provided, however, that (i) if an event described in subparagraph (a) above
shall occur, Employee shall continue to be disabled as of the date of
termination by the Company of Employee's employment hereunder pursuant to such
subparagraph and (ii) if an event described in subparagraph (b) or (c) above
shall occur, the Company shall terminate Employee's employment hereunder within
90 days following, and by reason of, the occurrence of such event.
2.3 Termination by Employee. Employee shall have the right to
terminate his employment under this Agreement at any time prior to the
termination of this Agreement pursuant to paragraph 2.1 hereof for any of the
following reasons and only for the following reasons:
(a) the occurrence, without Employee's express written
consent, of any one or more of the following events which, if
correctable, remains uncorrected for 30 days following written notice
of such occurrence by Employee to the Company: (i) a change in the
eligibility requirements under any bonus, incentive or compensation
plan, program or arrangement under which Employee is covered on the
day immediately preceding the Effective Date which adversely affects
Employee, except as may be required by law or to maintain the
qualified status of any plan, program or arrangement; (ii) the
reduction of Employee's base salary, as the same may hereafter be
increased from time to time; (iii) the assignment to Employee by the
Board of Directors of duties materially inconsistent with the
<PAGE> 4
duties associated with the positions described in paragraph 1.2 hereof
as such duties are constituted as of the day immediately preceding the
Effective Date (except (A) in connection with the termination of his
employment by the Company pursuant to paragraph 2.2 hereof or (B) as a
result of his disability); (iv) any action by the Company which
results in a material diminution in the position, duties or status of
Employee with the Company as contemplated by this Agreement, except
(A) for strategic reallocations of the personnel reporting to
Employee, (B) in connection with termination of his employment by the
Company pursuant to paragraph 2.2 hereof or (C) as a result of his
disability; or (v) the Company requiring Employee to be permanently
based anywhere other than within 50 miles of Dallas, Texas (Employee
shall not be deemed to be permanently based at any other location by
reason of temporary assignments for reasonable periods of times at
such other location if the Company or any of its subsidiaries or other
affiliates have a special need for Employee's services at such other
location); or
(b) a material breach by the Company of any material provision
of this Agreement which, if correctable, remains uncorrected for 30
days following written notice by Employee to the Company of such
breach;
provided however, that if an event described in subparagraph (a) or (b) above
shall occur, Employee shall terminate his employment hereunder within 90 days
following, and by reason of, the occurrence of such event.
2.4 Notice of Termination. If the Company or Employee desires to
terminate Employee's employment hereunder pursuant to paragraph 2.2 or 2.3
hereof, as the case may be, it or he shall do so by giving written notice to
the other party that it or he has elected to terminate Employee's employment
hereunder and stating the effective date and reason for such termination, and
upon the specified effective date Employee's employment hereunder shall be so
terminated; provided that no such action shall alter or amend any provision
hereof or rights arising hereunder.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the term of his employment hereunder,
Employee shall receive a minimum annual base salary determined by the Board of
Directors consistent with its practices for executive officers of the Company,
but not less than $150,000 per year, payable in accordance with the customary
payroll practices of the Company with respect to its executive officers. If
Employee's base annual salary is
<PAGE> 5
increased at any time during the term of this Agreement, it shall not
thereafter be decreased during the term of this Agreement.
3.2 Bonuses; Incentive Compensation Programs. During the term of
his employment hereunder, Employee (a) shall he paid such bonuses, if any, as
shall be determined by the Board of Directors consistent with its practices for
executive officers of the Company and (b) shall be entitled to participate, on
a basis commensurate with his positions with the Company, in all employee
incentive compensation programs maintained by the Company on or after the
Effective Date which are generally made available to executive officers of the
Company. If Employee is awarded any stock option or restricted stock grant
under the Company's Equity Incentive Plan during the term of this Agreement,
the agreement covering each such award shall provide that if Employee's
employment hereunder is terminated either by the Company in breach of this
Agreement or by Employee pursuant to paragraph 2.3 hereof, then all stock
options subject to such agreement shall become immediately exercisable in full
and all restrictions on all shares of restricted stock subject to such
agreement shall immediately lapse.
3.3 Vacation and Sick Leave. During each year of his employment
hereunder, Employee shall be entitled to vacation and sick leave, at full pay,
equal immediately to three weeks, and thereafter to such greater vacation
benefits as may be provided for by Hadson's vacation policies.
3.4 Other Company Benefits. During his employment hereunder,
Employee and, to the extent applicable, Employee's family, dependents and
beneficiaries, shall be allowed to participate in all employee benefit plans
and programs (including, without limitation, profit sharing, thrift, medical,
health and dental care, life insurance, disability insurance and pension
plans), including improvements or modifications of the same, available to
similarly-situated Company employees on or after the Effective Date, except for
such benefit plans and programs which the Board of Directors, in its sole
discretion, shall adopt for select employees to compensate them for special or
extenuating circumstances.
3.5 Obligations of the Company Regarding Benefit Plans. The
Company shall not by reason of this Article 3 be obligated to institute,
maintain or refrain from changing, amending or discontinuing any incentive
compensation or employee benefit plan or program, so long as such actions are
applicable to covered executive officers of the Company generally. Except to
the extent specifically set forth in this Article 3, nothing in this Agreement
is to be construed or interpreted to provide Employee greater rights,
participation, coverage or benefits under such benefit plans
<PAGE> 6
or programs than provided to similarly situated employees pursuant to the terms
and conditions of such benefit plans and programs. Moreover, unless
specifically provided for in written plan document adopted by the Board of
Directors, none of the benefits or arrangements described in this Article 3 or
in Article 4 hereof shall be secured or funded in any way, and each shall
instead constitute an unfunded and unsecured promise to pay money in the future
exclusively from the general assets of the Company.
ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION
4.1 By Expiration. Upon the termination of this Agreement
pursuant to paragraph 2.1 hereof, all compensation and all benefits to Employee
hereunder shall cease and terminate as of the date of such termination. In
such event, Employee shall be entitled to receive his base salary through the
date of such termination, together with a pro rata payment of any individual
bonuses or incentive compensation earned or accrued but not yet paid.
4.2 Prior to Expiration. (a) If Employee's employment hereunder
shall be terminated (i) by the Company pursuant to paragraph 2.2 hereof or (ii)
by Employee in breach of this Agreement, all compensation and all benefits to
Employee hereunder shall cease and terminate contemporaneously with such
termination of employment. Employee shall be entitled to receive his base
salary through the date of such termination, but shall not be entitled to any
individual bonuses or incentive compensation not yet paid at the date of such
termination.
(b) If Employee's employment hereunder is terminated (i) by the
Company in breach of this Agreement or (ii) by Employee pursuant to paragraph
2.3 hereof, then (A) all compensation and all benefits to Employee hereunder
shall cease and terminate contemporaneously with such termination of
employment, (B) Employee shall be entitled to receive his base salary through
the date of such termination, together with the full amount of any individual
bonuses or incentive compensation that would have been payable to him for the
year in which such termination occurred pursuant to the terms of the applicable
bonus or incentive compensation plan had he been employed by the Company at the
end of such year, and (C) Employee shall be entitled to be paid a payment in
settlement of all claims equal to two times the total of (x) the amount of his
highest annual base salary plus (y) the amount of his highest annual bonus
during the term of this Agreement. For purposes of the preceding clause (C),
if no greater bonus has been paid to Employee during the term of this
Agreement, then the highest annual bonus shall be deemed to be an amount equal
to no less than 25% of the highest base annual salary rate.
<PAGE> 7
(c) As a condition to the receipt of any payment under paragraph
4.2(b) hereof, Employee shall first execute a release, in the form established
by the Company, releasing and forever discharging the Company and its
affiliates and the officers, directors, employees and agents of the Company and
its affiliates from any and all claims and from any and all causes of action of
any kind or character, including but not limited to all claims or causes of
action arising out of Employee's employment with the Company (or any of its
affiliates) or the termination of such employment and expressly including, but
not limited to any such claims or causes of action based on the Age
Discrimination in Employment Act, the Americans With Disabilities Act and the
provisions of the Texas Commission on Human Rights Act that prohibit
discrimination on account of age or disability, or any other act that prohibits
discrimination on the basis of sex or race. If Employee is entitled to and
receives the payments provided under paragraph 4.2(b) hereof, performance of
the obligations of the Company thereunder will constitute full settlement of
all claims that Employee might otherwise assert against the Company or its
affiliates on account of the termination of the employment relationship.
4.3 Date of Payments. Any payment payable to Employee under
paragraph 4.2(a)or 4.2(b) hereof shall be paid within 30 days after the date of
termination of Employee's employment hereunder or at such other date as the
parties hereto agree.
4.4 Effect of Termination on Company Plans and Programs. Except
to the extent specifically provided in this Article 4, the provisions of this
Article 4 shall not affect any rights or obligations of the Company or Employee
under any employee benefit plan or program. Notwithstanding the foregoing,
Employee shall not be entitled to any payment that would otherwise be payable
to him under any severance plan or policy of the Company in connection with the
termination of his employment hereunder.
4.5 Limitation on Change of Control Actions. Notwithstanding the
provisions of Article 3 hereof and the preceding provisions of this Article 4,
any and all payments (including any benefit or transfer of property) in the
nature of compensation to or for the benefit of Employee under any arrangement
which is deemed to be contingent on a change of control for purposes of section
280G of the Internal Revenue Code ("change in control actions") shall be
collectively subject to an overall maximum limit. Such maximum limit shall be
$1.00 Less than the largest amount under which no portion of the "change of
control actions" is considered a "parachute payment," within the meaning of
section 280G of the Internal Revenue Code (taking into account all of the
limitations, exceptions and exemptions contained therein). Accordingly, to the
extent that the
<PAGE> 8
change of control actions would be considered a parachute payment, then the
portions of such change of control actions shall be reduced or eliminated in
the following order until the remaining change of control actions with respect
to Employee is $1.00 less than the maximum allowable which would not be
considered a parachute payment under the Internal Revenue Code:
(a) first, any cash payment to Employee; and
(b) second, any change of control actions not
described in clause (a) of this paragraph 4.5.
As used in this paragraph 4.5, the term "arrangement" includes any agreement
between Employee and the Company or any affiliate of the Company and any and
all of the Company's and any affiliate's salary, bonus, incentive, compensation
or benefit plans, programs or arrangements, and shall include this Agreement.
4.6 No Duty to Mitigate Losses. Employee shall have no duty to
find new employment following the termination of his employment (a) by Employee
pursuant to paragraph 2.3 hereof or (b) by the Company in breach of this
Agreement. Any salary,remuneration or other amounts received by Employee from a
third party for the providing of personal services (whether by employment or by
functioning as an independent contractor) or which might have been received by
Employee had he sought to provide such services to a third party shall not
reduce the Company's obligation to make any payments to Employee pursuant to
paragraph 4.2(b) hereof or the amount of such payments.
ARTICLE 5: CONFIDENTIAL INFORMATION
5.1 Company Information. Employee acknowledges that the Company's
business is highly competitive and that the Company's books, records and
documents, the Company's technical information concerning its products,
equipment, services and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning the Company's customers and business associates and other
proprietary information, including, but not limited to, systems, procedures,
manuals and data as well as financial information concerning the Company's
products and services (including the revenues, costs or profits associated with
any such products and services), information with respect to the nature and
type of the Company's products and services, the equipment and methods used and
preferred by the Company's customers and the fees paid by such customers, all
comprise confidential business information and trade secrets of the Company
which are valuable, special and unique assets of the Company, which the Company
uses in its business to
<PAGE> 9
obtain a competitive advantage over the Company's competitors which do not know
or use this information. Employee further acknowledges that protection of the
Company's confidential business information and trade secrets against
unauthorized disclosure and use is of critical importance to the Company in
maintaining its competitive position. Accordingly, Employee hereby agrees that
he will not, at any time during, and continuing until the second anniversary of
the termination of, his employment hereunder make or permit any unauthorized
disclosure of any confidential business information or trade secrets of the
Company, or make or permit any use thereof, except for the benefit of, and on
behalf of, the Company. For the purposes of this Article 5, the term "the
Company" shall also include affiliates of the Company.
5.2 Third Party Information. Employee acknowledges that, as a
result of his employment by the Company, he may from time to time have access
to, or knowledge of, confidential business information or trade secrets of
third parties, such as customers, suppliers, partners, joint venturers and the
like, of the Company. Employee agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as confidential business information
and trade secrets of the Company.
5.3 Return of Documents. All written or magnetic materials
records and other documents made by, or coming into the possession of, Employee
during the period of his employment by the Company (whether before, on or after
the Effective Date) which contain or disclose the Company confidential business
information or trade secrets shall be and remain the property of the Company.
Upon termination of Employee's employment hereunder for any reason or upon the
request of the Company at any time, Employee promptly shall deliver the same,
and all copies thereof, to the Company (for purposes of this sentence, the term
"the Company" shall not include affiliates of the Company).
5.4 Injunctive Relief. Without intending to limit the remedies
available to the Company and notwithstanding the provisions of paragraph 6.1
hereof, Employee acknowledges that a breach of any of the provisions of this
Article 5 would likely result in material irreparable injury to the Company
which would not in whole or in part, be compensable in money damages and for
which the Company would have no adequate remedy at law. Accordingly, Employee
agrees that, in the event of such a breach or threat thereof, the Company shall
be entitled to obtain a temporary restraining order and/or a preliminary or
permanent injunction restraining Employee from engaging in activities
prohibited by this Article 5 or such other relief as may be available to
<PAGE> 10
specifically ENFORCE any of the provisions of this Article 5.
ARTICLE 6: MISCELLANEOUS
6.1 Arbitration. Subject to the provisions of paragraph 5.4
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Dallas County, Texas
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Each party hereto shall bear his or its own costs of
arbitration, but if Employee is the prevailing party in such arbitration, he
shall be entitled to recover from the Company as part of any award entered his
reasonable expenses for attorneys' fees and disbursements.
6.2 Withholding. The Company may withhold from any compensation,
benefits or amounts payable under this Agreement all federal, state, city or
other taxes as may be required pursuant to any law or governmental regulation
or ruling.
6.3 Notices. For purposes of this Agreement, all notices and other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company, to: Hadson Corporation
2777 Stemmons Freeway, Suite 700
Dallas, TX 75207
Attention: President & CEO
If to Employee, to: Thomas W. Pounds
2777 Stemmons Freeway, Suite 700
Dallas, TX 75207
or to such other address as either such party may furnish to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
6.4 Applicable Law. This Agreement is entered into under and
shall be governed by, and construed and interpreted in accordance with, the
laws of the State of Texas.
6.5 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of
<PAGE> 11
this Agreement shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
6.6 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision shall not affect the validity
or enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
6.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
6.8 Headings. The paragraph headings in this Agreement have been
inserted for purposes of convenience and shall not be used for interpretive
purposes.
6.9 Affiliate. As used in this Agreement, "affiliate" shall mean
any entity which, directly or indirectly, owns or controls, is owned or
controlled by, or is under common ownership or control with, the Company.
6.10 Assignment. The rights and obligations of Employee hereunder
are personal and no right, benefit or obligation of Employee hereunder shall be
subject to voluntary or involuntary assignment, alienation or transfer, whether
by operation of law or otherwise,without the prior written consent of the
Company. Subject to the provisions of the preceding sentence, this Agreement
shall be binding upon, and inure to the benefit of, the parties hereto and
their respective heirs, administrators, executors, successors and assigns.
6.11 Term. This Agreement has a term co-extensive with the term of
employment specified in paragraph 2.1 hereof (without giving effect to the
third sentence thereof), provided that (a) except as otherwise provided herein.
termination shall not affect any right or obligation of any party which is
accrued or vested prior to or upon such termination and (b) the provisions of
Article 5 hereof shall survive the termination of this Agreement.
6.12 Entire Agreement. Except as provided in (a) written policies
and procedures promulgated by the Company that are applicable to executive
officers of the Company,(b) the written benefit plans and programs referenced
in Article 3 hereof or (c) any signed written agreements hereafter executed by
the Company and Employee, this Agreement constitutes the entire agreement of
the parties with regard to such subject matters, and contains all of the
covenants,
<PAGE> 12
promises, representations, warranties and agreements between the
parties with respect to such subject matters and replaces and merges previous
agreements and discussions pertaining to the employment relationship between
the Company and Employee. Any modification or waiver of any provision of this
Agreement will be effective only if it is in writing and signed by both of the
parties hereto.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement effective as of the Effective Date.
HADSON CORPORATION
/s/ Greg G. Jenkins
By Greg G. Jenkins,
President & CEO
/s/ Thomas W. Pounds
Thomas W. Pounds
<PAGE> 1
Exhibit 10.09
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made and entered into
effective November 10, 1994 by and between Hadson Corporation, a Delaware
corporation (the "Company") and Thomas W. Pounds ("Employee").
W I T N E S S E T H
WHEREAS, the Company and Employee entered into that certain Employment
Agreement effective as of July 18, 1994 (the "Employment Agreement"); and
WHEREAS, the Company and Employee desire to amend the Employment
Agreement as hereinafter provided;
NOW THEREFORE, for and in consideration of the mutual promises,
covenants and considerations herein and other good and valuable considerations,
the Company and Employee do hereby agree as follows:
1. Paragraph (b) of Section 4.2 of Article 4. of the Employment
Agreement is deleted in its entirety and the following is
substituted therefor:
(b) If Employee's employment hereunder is
terminated (i) by the company in breach of this
Agreement or (ii) by Employee pursuant to paragraph
2.3 hereof, then (A) all compensation and all
benefits to Employee hereunder shall cease and
terminate contemporaneously with such termination of
employment, (B) Employee shall be entitled to receive
his base salary and vacation earned but not taken
through the date of such termination, together with
the full amount of any individual bonuses or
incentive compensation that would have been payable
to him for the year in which such termination
occurred pursuant to the terms of the applicable
bonus or incentive compensation plan had he been
employed by the Company at the end of such year, and
(C) Employee shall be entitled to be paid a payment
in settlement of all claims equal to two times the
total of (x) the amount of his highest annual base
salary plus (y) an amount equal to the annual bonus
for which Employee would be eligible assuming 100% of
the bonus had been earned for the year in which such
termination occurred.
In addition to the above, the Company shall
at all times during the 24--month period following
the date of termination (the "Continuation Period")
maintain in full force and effect for the continued
benefit of Employee and Employee's eligible
dependents all life and medical and dental insurance
benefits available to Employee and Employee's
eligible dependents by virtue of being an employee of
the Company immediately
<PAGE> 2
prior to such termination, provided that Employee's
continued participation is possible under the general
terms and provisions of such plans and programs (or
any successor thereto). In the event that
participation by Employee in any such plan or program
after the date of termination is barred pursuant to
the terms thereof, the Company shall obtain
comparable coverage under individual policies for
Employee (and Employee's dependents). The Employee
shall be required to contribute to the cost of such
policies only the amounts which Employee would have
been required to pay had he or she remained in the
employ of the Company. Nothing herein shall operate
to reduce, or be construed as reducing, Employee's
(or a beneficiary's) group health plan continuation
rights under COBRA in any manner, and upon the end of
the Continuation Period Employee (or Employee's
beneficiary(ies)), if otherwise eligible, will be
entitled to elect COBRA continuation coverage for the
full period applicable as if that were Employee's
termination date. In the event Employee becomes
covered by another employer's group health plan
during the Continuation Period, the Company's group
health plan shall be liable for benefits only to the
extent such benefits are not covered by the
subsequent employer's group health plan.
2. Except as herein changed and amended, the Employment Agreement
shall continue in full force and effect as heretofore written.
3. This agreement shall be binding upon the parties hereto and
upon their respective successors, heirs and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
effective as of the date first hereinabove written.
HADSON CORPORATION
/s/ GREG G. JENKINS
By: Greg G. Jenkins
President and
Chief Executive Officer
/s/ THOMAS W. POUNDS
Thomas W. Pounds
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective as of
August 1, 1994 (the "Effective Date") by and between Hadson Corporation, a
Delaware corporation (the "Company"), and Richard N. Coffman ("Employee").
W I T N E S S E T H
WHEREAS, the Company desires to employ Employee in an executive
capacity on the terms and conditions, and for the consideration, hereinafter
set forth for the period provided herein commencing upon the Effective Date,
and Employee desires to be employed with the Company on such terms and
conditions and for such consideration;
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, the Company and Employee agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment. The Company agrees to employ Employee and
Employee agrees to be employed by the Company, beginning as of the Effective
Date and continuing for the period of time set forth in Article 2 of this
Agreement, on and subject to the terms and conditions of this Agreement.
1.2 Positions and Duties. The Company shall maintain Employee in
the positions of Vice President, Controller, or in such other positions as the
parties hereto mutually may agree. Employee agrees (a) to serve in the
positions referred to in the preceding sentence as well as in such additional
executive officer positions of the Company or any of its affiliates to which
Employee is elected from time to time and (b) to perform diligently and to the
best of his abilities the duties and services appertaining to such offices as
set forth in the bylaws of the Company or such affiliate, as the case may be,
as the same may be amended from time to time, as well as such additional duties
and services which the parties hereto mutually may agree upon from time to time
or, subject to paragraph 2.3(a)(iii) hereof, which the Board of Directors of
the Company (the "Board of Directors") or of such affiliate may prescribe.
Employee shall at all times comply with and be subject to such policies and
procedures as the Company may establish from time to time that are applicable
to executive officers of the Company.
1.3 Other Activities. During the period of his employment by the
Company, Employee shall devote his primary business time, energy and best
efforts to the business and affairs of the Company and its affiliates and shall
not
<PAGE> 2
engage, directly or indirectly, in any other business or businesses, whether or
not similar to that of the Company or its affiliates, except with the consent
of the Board of Directors or except to the extent that the Board of Directors
or such affiliate may prescribe, or induce any employee of the Company or any
affiliate to terminate his or her employment with the Company or such affiliate
except on behalf of the Company or such affiliate. The parties recognize and
agree that Employee may engage in passive personal investments and other
activities that do not conflict with the business and affairs of the Company or
its affiliates or interfere with Employee's performance of his duties
hereunder.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Term. Unless sooner terminated pursuant to other provisions
hereof, the Company shall employ Employee for a term beginning on the Effective
Date and ending on the second anniversary of the Effective Date. On each
anniversary of the Effective Date, commencing with the second anniversary of
the Effective Date, the term of this Agreement shall be extended automatically
for successive one-year periods unless on or prior to the February 1st
immediately preceding the last day of any such one-year period either the
Compensation Committee of the Board of Directors, on behalf of the Company, or
Employee shall give written notice to the other that no such automatic
extension shall occur, in which event this Agreement shall terminate on the
last day of such one-year period. Unless such notice shall specify that
Employee's employment with the Company shall terminate on the date of such
termination of this Agreement, the employment relationship between the Company
and Employee shall continue at-will following such termination.
Notwithstanding the preceding provisions of this paragraph, the term of
Employee's employment hereunder shall terminate upon his death.
2.2 Termination by the Company. The Company shall have the right
to terminate Employee's employment under this Agreement at any time prior to
the termination of this Agreement pursuant to paragraph 2.1 hereof for any of
the following reasons and only for the following reasons:
(a) Employee's continuing disability, which for purposes of
this Agreement shall mean Employee's becoming incapacitated by
accident, sickness or other circumstance which renders him mentally or
physically incapable, with reasonable accommodation (within the
meaning of the Americans with Disabilities Act of 1990, as amended),
of performing the essential functions of the duties and services
required of him hereunder for a period of more than 90 consecutive
days during any 12-month period;
<PAGE> 3
(b) for cause, which for purposes of this Agreement shall mean
any of the following, in each case as determined in good faith by the
Board of Directors in its sole discretion: (i) Employee's gross
negligence or willful misconduct in performance of the duties and
services required of him pursuant to this Agreement; (ii) the willful
and continued failure by Employee to follow the reasonable
instructions of the Board of Directors after written notice of such
failure has been given to Employee by the Board of Directors; (iii)
the willful commission by Employee of acts that are dishonest and
demonstrably and materially injurious to the Company, monetarily or
otherwise; or (iv) Employee's final conviction of a felony or of a
misdemeanor involving moral turpitude; or
(c) Employee's material breach of any material provision of
this Agreement which, if correctable, remains uncorrected for 30 days
following written notice to Employee by the Company of such breach;
provided, however, that (i) if an event described in subparagraph (a) above
shall occur, Employee shall continue to be disabled as of the date of
termination by the Company of Employee's employment hereunder pursuant to such
subparagraph and (ii) if an event described in subparagraph (b) or (c) above
shall occur, the Company shall terminate Employee's employment hereunder within
90 days following, and by reason of, the occurrence of such event.
2.3 Termination by Employee. Employee shall have the right to
terminate his employment under this Agreement at any time prior to the
termination of this Agreement pursuant to paragraph 2.1 hereof for any of the
following reasons and only for the following reasons:
(a) the occurrence, without Employee's express written
consent, of any one or more of the following events which, if
correctable, remains uncorrected for 30 days following written notice
of such occurrence by Employee to the Company: (i) a change in the
eligibility requirements under any bonus, incentive or compensation
plan, program or arrangement under which Employee is covered on the
day immediately preceding the Effective Date which adversely affects
Employee, except as may be required by law or to maintain the
qualified status of any plan, program or arrangement; (ii) the
reduction of Employee's base salary, as the same may hereafter be
increased from time to time; (iii) the assignment to Employee by the
Board of Directors of duties materially inconsistent with the duties
associated with the positions described in paragraph 1.2 hereof as
such duties are constituted as of the day immediately preceding the
Effective Date (except (A) in connection with the termination of his
<PAGE> 4
employment by the Company pursuant to paragraph 2.2 hereof or (B) as a
result of his disability); (iv) any action by the Company which
results in a material diminution in the position, duties or status of
Employee with the Company as contemplated by this Agreement, except
(A) for strategic reallocations of the personnel reporting to
Employee, (B) in connection with termination of his employment by the
Company pursuant to paragraph 2.2 hereof or (C) as a result of his
disability; or (v) the Company requiring Employee to be permanently
based anywhere other than within 50 miles of Dallas, Texas (Employee
shall not be deemed to be permanently based at any other location by
reason of temporary assignments for reasonable periods of times at
such other location if the Company or any of its subsidiaries or other
affiliates have a special need for Employee's services at such other
location); (vi) if the Company should notify the Employee that no
automatic extension of this Agreement as described in paragragh 2.1
hereof shall occur; or
(b) a material breach by the Company of any material provision
of this Agreement which, if correctable, remains uncorrected for 30
days following written notice by Employee to the Company of such
breach;
provided however, that if an event described in subparagraph (a) or (b) above
shall occur, Employee shall terminate his employment hereunder within 90 days
following, and by reason of, the occurrence of such event.
2.4 Notice of Termination. If the Company or Employee desires to
terminate Employee's employment hereunder pursuant to paragraph 2.2 or 2.3
hereof, as the case may be, it or he shall do so by giving written notice to
the other party that it or he has elected to terminate Employee's employment
hereunder and stating the effective date and reason for such termination, and
upon the specified effective date Employee's employment hereunder shall be so
terminated; provided that no such action shall alter or amend any provision
hereof or rights arising hereunder.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the term of his employment hereunder,
Employee shall receive a minimum annual base salary determined by the Board of
Directors consistent with its practices for executive officers of the Company,
but not less than $132,000 per year, payable in accordance with the customary
payroll practices of the Company with respect to its executive officers. If
Employee's base annual salary is increased at any time during the term of this
Agreement, it
<PAGE> 5
shall not thereafter be decreased during the term of this Agreement.
3.2 Bonuses; Incentive Compensation Programs. During the term of
his employment hereunder, Employee (a) shall he paid such bonuses, if any, as
shall be determined by the Board of Directors consistent with its practices for
executive officers of the Company and (b) shall be entitled to participate, on
a basis commensurate with his positions with the Company, in all employee
incentive compensation programs maintained by the Company on or after the
Effective Date which are generally made available to executive officers of the
Company. If Employee is awarded any stock option or restricted stock grant
under the Company's Equity Incentive Plan during the term of this Agreement,
the agreement covering each such award shall provide that if Employee's
employment hereunder is terminated either by the Company in breach of this
Agreement or by Employee pursuant to paragraph 2.3 hereof, then all stock
options subject to such agreement shall become immediately exercisable in full
and all restrictions on all shares of restricted stock subject to such
agreement shall immediately lapse.
3.3 Vacation and Sick Leave. During each year of his employment
hereunder, Employee shall be entitled to vacation and sick leave, at full pay,
equal immediately to four weeks, and thereafter to such greater vacation
benefits as may be provided for by Hadson's vacation policies.
3.4 Other Company Benefits. During his employment hereunder,
Employee and, to the extent applicable, Employee's family, dependents and
beneficiaries, shall be allowed to participate in all employee benefit plans
and programs (including, without limitation, profit sharing, thrift, medical,
health and dental care, life insurance, disability insurance and pension
plans), including improvements or modifications of the same, available to
similarly-situated Company employees on or after the Effective Date, except for
such benefit plans and programs which the Board of Directors, in its sole
discretion, shall adopt for select employees to compensate them for special or
extenuating circumstances.
3.5 Obligations of the Company Regarding Benefit Plans. The
Company shall not by reason of this Article 3 be obligated to institute,
maintain or refrain from changing, amending or discontinuing any incentive
compensation or employee benefit plan or program, so long as such actions are
applicable to covered executive officers of the Company generally. Except to
the extent specifically set forth in this Article 3, nothing in this Agreement
is to be construed or interpreted to provide Employee greater rights,
participation, coverage or benefits under such benefit plans or programs than
provided to similarly situated employees pursuant to the terms and conditions
of such benefit plans
<PAGE> 6
and programs. Moreover, unless specifically provided for
in written plan document adopted by the Board of Directors, none of the
benefits or arrangements described in this Article 3 or in Article 4 hereof
shall be secured or funded in any way, and each shall instead constitute an
unfunded and unsecured promise to pay money in the future exclusively from the
general assets of the Company.
ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION
4.1 By Expiration. Upon the termination of this Agreement
pursuant to paragraph 2.1 hereof, all compensation and all benefits to Employee
hereunder shall cease and terminate as of the date of such termination. In
such event, Employee shall be entitled to receive his base salary through the
date of such termination, together with a pro rata payment of any individual
bonuses or incentive compensation earned or accrued but not yet paid.
4.2 Prior to Expiration. (a) If Employee's employment hereunder
shall be terminated (i) by the Company pursuant to paragraph 2.2 hereof or (ii)
by Employee in breach of this Agreement, all compensation and all benefits to
Employee hereunder shall cease and terminate contemporaneously with such
termination of employment. Employee shall be entitled to receive his base
salary through the date of such termination, but shall not be entitled to any
individual bonuses or incentive compensation not yet paid at the date of such
termination.
(b) If Employee's employment hereunder is terminated (i) by the
Company in breach of this Agreement or (ii) by Employee pursuant to paragraph
2.3 hereof, then (A) all compensation and all benefits to Employee hereunder
shall cease and terminate contemporaneously with such termination of
employment, (B) Employee shall be entitled to receive his base salary through
the date of such termination, together with the full amount of any individual
bonuses or incentive compensation that would have been payable to him for the
year in which such termination occurred pursuant to the terms of the applicable
bonus or incentive compensation plan had he been employed by the Company at the
end of such year, and (C) Employee shall be entitled to be paid a payment in
settlement of all claims equal to one and one-half times the total of (x) the
amount of his highest annual base salary plus (y) the amount of his highest
annual bonus during the term of this Agreement. For purposes of the preceding
clause (C), if no greater bonus has been paid to Employee during the term of
this Agreement, then the highest annual bonus shall be deemed to be an amount
equal to no less than 25% of the highest base annual salary rate.
(c) As a condition to the receipt of any payment under paragraph
4.2(b) hereof, Employee shall first execute a release, in the form established
by the Company, releasing
<PAGE> 7
and forever discharging the Company and its affiliates and the officers,
directors, employees and agents of the Company and its affiliates from any and
all claims and from any and all causes of action of any kind or character,
including but not limited to all claims or causes of action arising out of
Employee's employment with the Company (or any of its affiliates) or the
termination of such employment and expressly including, but not limited to any
such claims or causes of action based on the Age Discrimination in Employment
Act, the Americans With Disabilities Act and the provisions of the Texas
Commission on Human Rights Act that prohibit discrimination on account of age
or disability, or any other act that prohibits discrimination on the basis of
sex or race. If Employee is entitled to and receives the payments provided
under paragraph 4.2(b) hereof, performance of the obligations of the Company
thereunder will constitute full settlement of all claims that Employee might
otherwise assert against the Company or its affiliates on account of the
termination of the employment relationship.
4.3 Date of Payments. Any payment payable to Employee under
paragraph 4.2(a)or 4.2(b) hereof shall be paid within 30 days after the date of
termination of Employee's employment hereunder or at such other date as the
parties hereto agree.
4.4 Effect of Termination on Company Plans and Programs. Except
to the extent specifically provided in this Article 4, the provisions of this
Article 4 shall not affect any rights or obligations of the Company or Employee
under any employee benefit plan or program. Notwithstanding the foregoing,
Employee shall not be entitled to any payment that would otherwise be payable
to him under any severance plan or policy of the Company in connection with the
termination of his employment hereunder.
4.5 Limitation on Change of Control Actions. Notwithstanding the
provisions of Article 3 hereof and the preceding provisions of this Article 4,
any and all payments (including any benefit or transfer of property) in the
nature of compensation to or for the benefit of Employee under any arrangement
which is deemed to be contingent on a change of control for purposes of section
280G of the Internal Revenue Code ("change in control actions") shall be
collectively subject to an overall maximum limit. Such maximum limit shall be
$1.00 Less than the largest amount under which no portion of the "change of
control actions" is considered a "parachute payment," within the meaning of
section 280G of the Internal Revenue Code (taking into account all of the
limitations, exceptions and exemptions contained therein). Accordingly, to the
extent that the change of control actions would be considered a parachute
payment, then the portions of such change of control actions shall be reduced
or eliminated in the following order until the remaining change of control
actions with respect to
<PAGE> 8
Employee is $1.00 less than the maximum allowable which would not be considered
a parachute payment under the Internal Revenue Code:
(a) first, any cash payment to Employee; and
(b) second, any change of control actions not
described in clause (a) of this paragraph 4.5.
As used in this paragraph 4.5, the term "arrangement" includes any agreement
between Employee and the Company or any affiliate of the Company and any and
all of the Company's and any affiliate's salary, bonus, incentive, compensation
or benefit plans, programs or arrangements, and shall include this Agreement.
4.6 No Duty to Mitigate Losses. Employee shall have no duty to
find new employment following the termination of his employment (a) by Employee
pursuant to paragraph 2.3 hereof or (b) by the Company in breach of this
Agreement. Any salary,remuneration or other amounts received by Employee from a
third party for the providing of personal services (whether by employment or by
functioning as an independent contractor) or which might have been received by
Employee had he sought to provide such services to a third party shall not
reduce the Company's obligation to make any payments to Employee pursuant to
paragraph 4.2(b) hereof or the amount of such payments.
ARTICLE 5: CONFIDENTIAL INFORMATION
5.1 Company Information. Employee acknowledges that the Company's
business is highly competitive and that the Company's books, records and
documents, the Company's technical information concerning its products,
equipment, services and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning the Company's customers and business associates and other
proprietary information, including, but not limited to, systems, procedures,
manuals and data as well as financial information concerning the Company's
products and services (including the revenues, costs or profits associated with
any such products and services), information with respect to the nature and
type of the Company's products and services, the equipment and methods used and
preferred by the Company's customers and the fees paid by such customers, all
comprise confidential business information and trade secrets of the Company
which are valuable, special and unique assets of the Company, which the Company
uses in its business to obtain a competitive advantage over the Company's
competitors which do not know or use this information. Employee further
acknowledges that protection of the Company's confidential business information
and trade secrets against unauthorized disclosure and use is of
<PAGE> 9
critical importance to the Company in maintaining its competitive position.
Accordingly, Employee hereby agrees that he will not, at any time during, and
continuing until the second anniversary of the termination of, his employment
hereunder make or permit any unauthorized disclosure of any confidential
business information or trade secrets of the Company, or make or permit any use
thereof, except for the benefit of, and on behalf of, the Company. For the
purposes of this Article 5, the term "the Company" shall also include
affiliates of the Company.
5.2 Third Party Information. Employee acknowledges that, as a
result of his employment by the Company, he may from time to time have access
to, or knowledge of, confidential business information or trade secrets of
third parties, such as customers, suppliers, partners, joint venturers and the
like, of the Company. Employee agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as confidential business information
and trade secrets of the Company.
5.3 Return of Documents. All written or magnetic materials
records and other documents made by, or coming into the possession of, Employee
during the period of his employment by the Company (whether before, on or after
the Effective Date) which contain or disclose the Company confidential business
information or trade secrets shall be and remain the property of the Company.
Upon termination of Employee's employment hereunder for any reason or upon the
request of the Company at any time, Employee promptly shall deliver the same,
and all copies thereof, to the Company (for purposes of this sentence, the term
"the Company" shall not include affiliates of the Company).
5.4 Injunctive Relief. Without intending to limit the remedies
available to the Company and notwithstanding the provisions of paragraph 6.1
hereof, Employee acknowledges that a breach of any of the provisions of this
Article 5 would likely result in material irreparable injury to the Company
which would not in whole or in part, be compensable in money damages and for
which the Company would have no adequate remedy at law. Accordingly, Employee
agrees that, in the event of such a breach or threat thereof, the Company shall
be entitled to obtain a temporary restraining order and/or a preliminary or
permanent injunction restraining Employee from engaging in activities
prohibited by this Article 5 or such other relief as may be available to
specifically ENFORCE any of the provisions of this Article 5.
<PAGE> 10
ARTICLE 6: MISCELLANEOUS
6.1 Arbitration. Subject to the provisions of paragraph 5.4
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Dallas County, Texas
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Each party hereto shall bear his or its own costs of
arbitration, but if Employee is the prevailing party in such arbitration, he
shall be entitled to recover from the Company as part of any award entered his
reasonable expenses for attorneys' fees and disbursements.
6.2 Withholding. The Company may withhold from any compensation,
benefits or amounts payable under this Agreement all federal, state, city or
other taxes as may be required pursuant to any law or governmental regulation
or ruling.
6.3 Notices. For purposes of this Agreement, all notices and other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company, to: Hadson Corporation
2777 Stemmons Freeway, Suite 700
Dallas, TX 75207
Attention: General Counsel
If to Employee, to: Richard N. Coffman
2777 Stemmons Freeway, Suite 700
Dallas, TX 75207
or to such other address as either such party may furnish to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
6.4 Applicable Law. This Agreement is entered into under and
shall be governed by, and construed and interpreted in accordance with, the
laws of the State of Texas.
6.5 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
<PAGE> 11
6.6 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision shall not affect the validity
or enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
6.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
6.8 Headings. The paragraph headings in this Agreement have been
inserted for purposes of convenience and shall not be used for interpretive
purposes.
6.9 Affiliate. As used in this Agreement, "affiliate" shall mean
any entity which, directly or indirectly, owns or controls, is owned or
controlled by, or is under common ownership or control with, the Company.
6.10 Assignment. The rights and obligations of Employee hereunder
are personal and no right, benefit or obligation of Employee hereunder shall be
subject to voluntary or involuntary assignment, alienation or transfer, whether
by operation of law or otherwise,without the prior written consent of the
Company. Subject to the provisions of the preceding sentence, this Agreement
shall be binding upon, and inure to the benefit of, the parties hereto and
their respective heirs, administrators, executors, successors and assigns.
6.11 Term. This Agreement has a term co-extensive with the term of
employment specified in paragraph 2.1 hereof (without giving effect to the
third sentence thereof), provided that (a) except as otherwise provided herein.
termination shall not affect any right or obligation of any party which is
accrued or vested prior to or upon such termination and (b) the provisions of
Article 5 hereof shall survive the termination of this Agreement.
6.12 Entire Agreement. Except as provided in (a) written policies
and procedures promulgated by the Company that are applicable to executive
officers of the Company,(b) the written benefit plans and programs referenced
in Article 3 hereof or (c) any signed written agreements hereafter executed by
the Company and Employee, this Agreement constitutes the entire agreement of
the parties with regard to such subject matters, and contains all of the
covenants, promises, representations, warranties and agreements between the
parties with respect to such subject matters and replaces and merges previous
agreements and discussions pertaining to the employment relationship between
the Company and Employee. Any modification or waiver of any
<PAGE> 12
provision of this Agreement will be effective only if it is in writing and
signed by both of the parties hereto.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement effective as of the Effective Date.
HADSON CORPORATION
/s/ Robert P. Capps
By Robert P. Capps
Executive Vice President, CFO
/s/ Richard N. Coffman
Richard N. Coffman
<PAGE> 1
Exhibit 10.11
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made and entered into
effective November 10, 1994 by and between Hadson Corporation, a Delaware
corporation (the "Company") and Richard N. Coffman ("Employee").
W I T N E S S E T H
WHEREAS, the Company and Employee entered into that certain Employment
Agreement effective as of August 1, 1994 (the "Employment Agreement"); and
WHEREAS, the Company and Employee desire to amend the Employment
Agreement as hereinafter provided;
NOW THEREFORE, for and in consideration of the mutual promises,
covenants and considerations herein and other good and valuable considerations,
the Company and Employee do hereby agree as follows:
1. Paragraph (b) of Section 4.2 of Article 4. of the Employment
Agreement is deleted in its entirety and the following is
substituted therefor:
(b) If Employee's employment hereunder is
terminated (i) by the company in breach of this
Agreement or (ii) by Employee pursuant to paragraph
2.3 hereof, then (A) all compensation and all
benefits to Employee hereunder shall cease and
terminate contemporaneously with such termination of
employment, (B) Employee shall be entitled to receive
his base salary and vacation earned but not taken
through the date of such termination, together with
the full amount of any individual bonuses or
incentive compensation that would have been payable
to him for the year in which such termination
occurred pursuant to the terms of the applicable
bonus or incentive compensation plan had he been
employed by the Company at the end of such year, and
(C) Employee shall be entitled to be paid a payment
in settlement of all claims equal to one and one-half
times the total of (x) the amount of his highest
annual base salary plus (y) an amount equal to the
annual bonus for which Employee would be eligible
assuming 100% of the bonus had been earned for the
year in which such termination occurred.
In addition to the above, the Company shall
at all times during the 24--month period following
the date of termination (the "Continuation Period")
maintain in full force and effect for the continued
benefit of Employee and Employee's eligible
dependents all life and medical and dental insurance
benefits available to Employee and Employee's
eligible dependents by virtue of being an employee of
the Company immediately
<PAGE> 2
prior to such termination, provided that Employee's
continued participation is possible under the general
terms and provisions of such plans and programs (or
any successor thereto). In the event that
participation by Employee in any such plan or program
after the date of termination is barred pursuant to
the terms thereof, the Company shall obtain
comparable coverage under individual policies for
Employee (and Employee's dependents). The Employee
shall be required to contribute to the cost of such
policies only the amounts which Employee would have
been required to pay had he or she remained in the
employ of the Company. Nothing herein shall operate
to reduce, or be construed as reducing, Employee's
(or a beneficiary's) group health plan continuation
rights under COBRA in any manner, and upon the end of
the Continuation Period Employee (or Employee's
beneficiary(ies)), if otherwise eligible, will be
entitled to elect COBRA continuation coverage for the
full period applicable as if that were Employee's
termination date. In the event Employee becomes
covered by another employer's group health plan
during the Continuation Period, the Company's group
health plan shall be liable for benefits only to the
extent such benefits are not covered by the
subsequent employer's group health plan.
2. Except as herein changed and amended, the Employment Agreement
shall continue in full force and effect as heretofore written.
3. This agreement shall be binding upon the parties hereto and
upon their respective successors, heirs and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
effective as of the date first hereinabove written.
HADSON CORPORATION
/s/ GREG G. JENKINS
By: Greg G. Jenkins
President and
Chief Executive Officer
/s/ RICHARD N. COFFMAN
Richard N. Coffman
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective as of
November 10, 1994 (the "Effective Date") by and between Hadson Corporation, a
Delaware corporation (the "Company"), and Kathleen M. Eisbrenner ("Employee").
W I T N E S S E T H
WHEREAS, the Company desires to employ Employee in an executive
capacity on the terms and conditions, and for the consideration, hereinafter
set forth for the period provided herein commencing upon the Effective Date,
and Employee desires to be employed with the Company on such terms and
conditions and for such consideration;
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, the Company and Employee agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment. The Company agrees to employ Employee and
Employee agrees to be employed by the Company, beginning as of the Effective
Date and continuing for the period of time set forth in Article 2 of this
Agreement, on and subject to the terms and conditions of this Agreement.
1.2 Positions and Duties. The Company shall maintain Employee in
the positions of Vice President, Marketing and Gas Administration of the
Company and in the positions of Senior Vice President, Marketing and Gas
Administration of the Company's natural gas marketing subsidiaries, or in such
other positions as the parties hereto mutually may agree. Employee agrees (a)
to serve in the positions referred to in the preceding sentence as well as in
such additional executive officer positions of the Company or any of its
affiliates to which Employee is elected from time to time and (b) to perform
diligently and to the best of her abilities the duties and services
appertaining to such offices as set forth in the bylaws of the Company or such
affiliate, as the case may be, as the same may be amended from time to time, as
well as such additional duties and services which the parties hereto mutually
may agree upon from time to time or, subject to paragraph 2.3(a)(iii) hereof,
which the Board of Directors of the Company (the "Board of Directors") or of
such affiliate may prescribe. Employee shall at all times comply with and be
subject to such policies and procedures as the Company may establish from time
to time that are applicable to executive officers of the Company.
Notwithstanding anything herein to the contrary, any restructuring,
realignment, consolidation or sale of any of the Company's subsidiaries that
results in
<PAGE> 2
loss of position in those subsidiaries by Employee shall not be a breach of the
Agreement by the Company, nor shall the same give rise to a right of
termination by Employee pursuant to Section 2.3 of Article 2, hereof.
1.3 Other Activities. During the period of her employment by the
Company, Employee shall devote her primary business time, energy and best
efforts to the business and affairs of the Company and its affiliates and shall
not engage, directly or indirectly, in any other business or businesses,
whether or not similar to that of the Company or its affiliates, except with
the consent of the Board of Directors or except to the extent that the Board of
Directors or such affiliate may prescribe, or induce any employee of the
Company or any affiliate to terminate her or her employment with the Company or
such affiliate except on behalf of the Company or such affiliate. The parties
recognize and agree that Employee may engage in passive personal investments
and other activities that do not conflict with the business and affairs of the
Company or its affiliates or interfere with Employee's performance of his
duties hereunder.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Term. Unless sooner terminated pursuant to other provisions
hereof, the Company shall employ Employee for a term beginning on the Effective
Date and ending on the second anniversary of the Effective Date. On each
anniversary of the Effective Date, commencing with the second anniversary of
the Effective Date, the term of this Agreement shall be extended automatically
for successive one-year periods unless on or prior to the May 10th immediately
preceding the last day of any such one-year period either the Compensation
Committee of the Board of Directors, on behalf of the Company, or Employee
shall give written notice to the other that no such automatic extension shall
occur, in which event this Agreement shall terminate on the last day of such
one-year period. Unless such notice shall specify that Employee's employment
with the Company shall terminate on the date of such termination of this
Agreement, the employment relationship between the Company and Employee shall
continue at-will following such termination. Notwithstanding the preceding
provisions of this paragraph, the term of Employee's employment hereunder shall
terminate upon her death.
2.2 Termination by the Company. The Company shall have the right
to terminate Employee's employment under this Agreement at any time prior to
the termination of this Agreement pursuant to paragraph 2.1 hereof for any of
the following reasons and only for the following reasons:
<PAGE> 3
(a) Employee's continuing disability, which for purposes of
this Agreement shall mean Employee's becoming incapacitated by
accident, sickness or other circumstance which renders him mentally or
physically incapable, with reasonable accommodation (within the
meaning of the Americans with Disabilities Act of 1990, as amended),
of performing the essential functions of the duties and services
required of him hereunder for a period of more than 90 consecutive
days during any 12-month period;
(b) for cause, which for purposes of this Agreement shall mean
any of the following, in each case as determined in good faith by the
Board of Directors in its sole discretion: (i) Employee's gross
negligence or willful misconduct in performance of the duties and
services required of her pursuant to this Agreement; (ii) the willful
and continued failure by Employee to follow the reasonable
instructions of the Board of Directors after written notice of such
failure has been given to Employee by the Board of Directors; (iii)
the willful commission by Employee of acts that are dishonest and
demonstrably and materially injurious to the Company, monetarily or
otherwise; or (iv) Employee's final conviction of a felony or of a
misdemeanor involving moral turpitude; or
(c) Employee's material breach of any material provision of
this Agreement which, if correctable, remains uncorrected for 30 days
following written notice to Employee by the Company of such breach;
provided, however, that (i) if an event described in subparagraph (a) above
shall occur, Employee shall continue to be disabled as of the date of
termination by the Company of Employee's employment hereunder pursuant to such
subparagraph and (ii) if an event described in subparagraph (b) or (c) above
shall occur, the Company shall terminate Employee's employment hereunder within
90 days following, and by reason of, the occurrence of such event.
2.3 Termination by Employee. Employee shall have the right to
terminate her employment under this Agreement at any time prior to the
termination of this Agreement pursuant to paragraph 2.1 hereof for any of the
following reasons and only for the following reasons:
(a) the occurrence, without Employee's express written
consent, of any one or more of the following events which, if
correctable, remains uncorrected for 30 days following written notice
of such occurrence by Employee to the Company: (i) a change in the
eligibility requirements under any bonus, incentive or compensation
plan, program or arrangement under which Employee is covered on the
day immediately preceding
<PAGE> 4
the Effective Date which adversely affects Employee, except as may be
required by law or to maintain the qualified status of any plan,
program or arrangement; (ii) the reduction of Employee's base salary,
as the same may hereafter be increased from time to time; (iii) the
assignment to Employee by the Board of Directors of duties materially
inconsistent with the duties associated with the positions described
in paragraph 1.2 hereof as such duties are constituted as of the day
immediately preceding the Effective Date (except (A) in connection
with the termination of his employment by the Company pursuant to
paragraph 2.2 hereof or (B) as a result of her disability); (iv) any
action by the Company which results in a material diminution in the
position, duties or status of Employee with the Company as
contemplated by this Agreement, except (A) for strategic reallocations
of the personnel reporting to Employee, (B) in connection with
termination of her employment by the Company pursuant to paragraph 2.2
hereof or (C) as a result of her disability; or
(b) a material breach by the Company of any material provision
of this Agreement which, if correctable, remains uncorrected for 30
days following written notice by Employee to the Company of such
breach;
provided however, that if an event described in subparagraph (a) or (b) above
shall occur, Employee shall terminate her employment hereunder within 90 days
following, and by reason of, the occurrence of such event.
2.4 Notice of Termination. If the Company or Employee desires to
terminate Employee's employment hereunder pursuant to paragraph 2.2 or 2.3
hereof, as the case may be, it or she shall do so by giving written notice to
the other party that it or she has elected to terminate Employee's employment
hereunder and stating the effective date and reason for such termination, and
upon the specified effective date Employee's employment hereunder shall be so
terminated; provided that no such action shall alter or amend any provision
hereof or rights arising hereunder.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the term of her employment hereunder,
Employee shall receive a minimum annual base salary determined by the Board of
Directors consistent with its practices for executive officers of the Company,
but not less than $110,000 per year, payable in accordance with the customary
payroll practices of the Company with respect to its executive officers. If
Employee's base annual salary is increased at any time during the term of this
Agreement, it
<PAGE> 5
shall not thereafter be decreased during the term of this Agreement.
3.2 Bonuses; Incentive Compensation Programs. During the term of
her employment hereunder, Employee (a) shall be paid such bonuses, if any, as
shall be determined by the Board of Directors consistent with its practices for
executive officers of the Company and (b) shall be entitled to participate, on
a basis commensurate with her positions with the Company, in all employee
incentive compensation programs maintained by the Company on or after the
Effective Date which are generally made available to executive officers of the
Company. If Employee is awarded any stock option or restricted stock grant
under the Company's Equity Incentive Plan during the term of this Agreement,
the agreement covering each such award shall provide that if Employee's
employment hereunder is terminated either by the Company in breach of this
Agreement or by Employee pursuant to paragraph 2.3 hereof, then all stock
options subject to such agreement shall become immediately exercisable in full
and all restrictions on all shares of restricted stock subject to such
agreement shall immediately lapse.
3.3 Vacation and Sick Leave. During each year of her employment
hereunder, Employee shall be entitled to vacation and sick leave, at full pay,
equal to such vacation benefits as may be provided for by Hadson's vacation
policies.
3.4 Other Company Benefits. During her employment hereunder,
Employee and, to the extent applicable, Employee's family, dependents and
beneficiaries, shall be allowed to participate in all employee benefit plans
and programs (including, without limitation, profit sharing, thrift, medical,
health and dental care, life insurance, disability insurance and pension
plans), including improvements or modifications of the same, available to
similarly-situated Company employees on or after the Effective Date, except for
such benefit plans and programs which the Board of Directors, in its sole
discretion, shall adopt for select employees to compensate them for special or
extenuating circumstances.
3.5 Obligations of the Company Regarding Benefit Plans. The
Company shall not by reason of this Article 3 be obligated to institute,
maintain or refrain from changing, amending or discontinuing any incentive
compensation or employee benefit plan or program, so long as such actions are
applicable to covered executive officers of the Company generally. Except to
the extent specifically set forth in this Article 3, nothing in this Agreement
is to be construed or interpreted to provide Employee greater rights,
participation, coverage or benefits under such benefit plans or programs than
provided to similarly situated employees pursuant to the terms and conditions
of such benefit plans and programs. Moreover, unless specifically provided for
in
<PAGE> 6
written plan document adopted by the Board of Directors, none of the benefits
or arrangements described in this Article 3 or in Article 4 hereof shall be
secured or funded in any way, and each shall instead constitute an unfunded and
unsecured promise to pay money in the future exclusively from the general
assets of the Company.
ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION
4.1 By Expiration. Upon the termination of this Agreement
pursuant to paragraph 2.1 hereof, all compensation and all benefits to Employee
hereunder shall cease and terminate as of the date of such termination. In
such event, Employee shall be entitled to receive her base salary through the
date of such termination, together with a pro rata payment of any individual
bonuses or incentive compensation earned or accrued but not yet paid.
4.2 Prior to Expiration. (a) If Employee's employment hereunder
shall be terminated (i) by the Company pursuant to paragraph 2.2 hereof or (ii)
by Employee in breach of this Agreement, all compensation and all benefits to
Employee hereunder shall cease and terminate contemporaneously with such
termination of employment. Employee shall be entitled to receive her base
salary through the date of such termination, but shall not be entitled to any
individual bonuses or incentive compensation not yet paid at the date of such
termination.
(b) If Employee's employment hereunder is terminated (i) by the
Company in breach of this Agreement or (ii) by Employee pursuant to paragraph
2.3 hereof, then (A) all compensation and all benefits to Employee hereunder
shall cease and terminate contemporaneously with such termination of
employment, (B) Employee shall be entitled to receive her base salary through
the date of such termination, together with the full amount of any individual
bonuses or incentive compensation that would have been payable to her for the
year in which such termination occurred pursuant to the terms of the applicable
bonus or incentive compensation plan had she been employed by the Company at
the end of such year, and (C) Employee shall be entitled to be paid a payment
in settlement of all claims equal to two times the total of (x) the amount of
her highest annual base salary plus (y) an amount equal to the annual bonus for
which Employee would be eligible assuming 100% of the bonus had been earned for
the year in which such termination occurred.
In addition to the above, the Company shall at all times
during the 24-month period following the Date of Termination (the "Continuation
Period") maintain in full force and effect for the continued benefit of
Employee and Employee's eligible dependents all life and medical and dental
insurance benefits available to Employee and
<PAGE> 7
Employee's eligible dependents by virtue of being an Employee of the Company
immediately prior to such termination, provided that Employee's continued
participation is possible under the general terms and provisions of such plans
and programs (or any successor thereto). In the event that participation by
Employee in any such plan or program after the Date of Termination is barred
pursuant to the terms thereof, the Company shall obtain comparable coverage
under individual policies for Employee (and Employee's dependents). The
Employee shall be required to contribute to the cost of such policies only the
amounts which Employee would have been required to pay had he or she remained
in the employ of the Company. Nothing herein shall operate to reduce, or be
construed as reducing, Employee's (or a beneficiary's) group health plan
continuation rights under COBRA in any manner, and upon the end of the
Continuation Period Employee (or Employee's beneficiary(ies)), if otherwise
eligible, will be entitled to elect COBRA continuation coverage for the full
period applicable as if that were Employee's termination date. In the event
Employee becomes covered by another employer's group health plan during the
Continuation Period, the Company's group health plan shall be liable for
benefits only to the extent such benefits are not covered by the subsequent
employer's group health plan.
(c) As a condition to the receipt of any payment under paragraph
4.2(b) hereof, Employee shall first execute a release, in the form established
by the Company, releasing and forever discharging the Company and its
affiliates and the officers, directors, employees and agents of the Company and
its affiliates from any and all claims and from any and all causes of action of
any kind or character, including but not limited to all claims or causes of
action arising out of Employee's employment with the Company (or any of its
affiliates) or the termination of such employment and expressly including, but
not limited to any such claims or causes of action based on the Age
Discrimination in Employment Act, the Americans With Disabilities Act and the
provisions of the Texas Commission on Human Rights Act that prohibit
discrimination on account of age or disability, or any other act that prohibits
discrimination on the basis of sex or race. If Employee is entitled to and
receives the payments provided under paragraph 4.2(b) hereof, performance of
the obligations of the Company thereunder will constitute full settlement of
all claims that Employee might otherwise assert against the Company or its
affiliates on account of the termination of the employment relationship.
4.3 Date of Payments. Any payment payable to Employee under
paragraph 4.2(a)or 4.2(b) hereof shall be paid within 30 days after the date of
termination of Employee's employment hereunder or at such other date as the
parties hereto agree.
<PAGE> 8
4.4 Effect of Termination on Company Plans and Programs. Except
to the extent specifically provided in this Article 4, the provisions of this
Article 4 shall not affect any rights or obligations of the Company or Employee
under any employee benefit plan or program. Notwithstanding the foregoing,
Employee shall not be entitled to any payment that would otherwise be payable
to her under any severance plan or policy of the Company in connection with the
termination of his employment hereunder.
4.5 Limitation on Change of Control Actions. Notwithstanding the
provisions of Article 3 hereof and the preceding provisions of this Article 4,
any and all payments (including any benefit or transfer of property) in the
nature of compensation to or for the benefit of Employee under any arrangement
which is deemed to be contingent on a change of control for purposes of section
280G of the Internal Revenue Code ("change in control actions") shall be
collectively subject to an overall maximum limit. Such maximum limit shall be
$1.00 less than the largest amount under which no portion of the "change of
control actions" is considered a "parachute payment," within the meaning of
section 280G of the Internal Revenue Code (taking into account all of the
limitations, exceptions and exemptions contained therein). Accordingly, to the
extent that the change of control actions would be considered a parachute
payment, then the portions of such change of control actions shall be reduced
or eliminated in the following order until the remaining change of control
actions with respect to Employee is $1.00 less than the maximum allowable which
would not be considered a parachute payment under the Internal Revenue Code:
(a) first, any cash payment to Employee; and
(b) second, any change of control actions not
described in clause (a) of this paragraph 4.5.
As used in this paragraph 4.5, the term "arrangement" includes any agreement
between Employee and the Company or any affiliate of the Company and any and
all of the Company's and any affiliate's salary, bonus, incentive, compensation
or benefit plans, programs or arrangements, and shall include this Agreement.
4.6 No Duty to Mitigate Losses. Employee shall have no duty to
find new employment following the termination of her employment (a) by Employee
pursuant to paragraph 2.3 hereof or (b) by the Company in breach of this
Agreement. Any salary, remuneration or other amounts received by Employee from
a third party for the providing of personal services (whether by employment or
by functioning as an independent contractor) or which might have been received
by Employee had she sought to provide such services to a third party shall not
reduce the Company's obligation to make any
<PAGE> 9
payments to Employee pursuant to paragraph 4.2(b) hereof or the amount of such
payments.
ARTICLE 5: CONFIDENTIAL INFORMATION
5.1 Company Information. Employee acknowledges that the Company's
business is highly competitive and that the Company's books, records and
documents, the Company's technical information concerning its products,
equipment, services and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning the Company's customers and business associates and other
proprietary information, including, but not limited to, systems, procedures,
manuals and data as well as financial information concerning the Company's
products and services (including the revenues, costs or profits associated with
any such products and services), information with respect to the nature and
type of the Company's products and services, the equipment and methods used and
preferred by the Company's customers and the fees paid by such customers, all
comprise confidential business information and trade secrets of the Company
which are valuable, special and unique assets of the Company, which the Company
uses in its business to obtain a competitive advantage over the Company's
competitors which do not know or use this information. Employee further
acknowledges that protection of the Company's confidential business information
and trade secrets against unauthorized disclosure and use is of critical
importance to the Company in maintaining its competitive position.
Accordingly, Employee hereby agrees that she will not, at any time during, and
continuing until the second anniversary of the termination of, her employment
hereunder make or permit any unauthorized disclosure of any confidential
business information or trade secrets of the Company, or make or permit any use
thereof, except for the benefit of, and on behalf of, the Company. For the
purposes of this Article 5, the term "the Company" shall also include
affiliates of the Company.
5.2 Third Party Information. Employee acknowledges that, as a
result of her employment by the Company, she may from time to time have access
to, or knowledge of, confidential business information or trade secrets of
third parties, such as customers, suppliers, partners, joint venturers and the
like, of the Company. Employee agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as confidential business information
and trade secrets of the Company.
5.3 Return of Documents. All written or magnetic materials
records and other documents made by, or coming into the possession of, Employee
during the period of her employment by the Company (whether before, on or after
the
<PAGE> 10
Effective Date) which contain or disclose the Company confidential business
information or trade secrets shall be and remain the property of the Company.
Upon termination of Employee's employment hereunder for any reason or upon the
request of the Company at any time, Employee promptly shall deliver the same,
and all copies thereof, to the Company (for purposes of this sentence, the term
"the Company" shall not include affiliates of the Company).
5.4 Injunctive Relief. Without intending to limit the remedies
available to the Company and notwithstanding the provisions of paragraph 6.1
hereof, Employee acknowledges that a breach of any of the provisions of this
Article 5 would likely result in material irreparable injury to the Company
which would not in whole or in part, be compensable in money damages and for
which the Company would have no adequate remedy at law. Accordingly, Employee
agrees that, in the event of such a breach or threat thereof, the Company shall
be entitled to obtain a temporary restraining order and/or a preliminary or
permanent injunction restraining Employee from engaging in activities
prohibited by this Article 5 or such other relief as may be available to
specifically ENFORCE any of the provisions of this Article 5.
ARTICLE 6: MISCELLANEOUS
6.1 Arbitration. Subject to the provisions of paragraph 5.4
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Dallas County, Texas
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Each party hereto shall bear her or its own costs of
arbitration, but if Employee is the prevailing party in such arbitration, she
shall be entitled to recover from the Company as part of any award entered her
reasonable expenses for attorneys' fees and disbursements.
6.2 Withholding. The Company may withhold from any compensation,
benefits or amounts payable under this Agreement all federal, state, city or
other taxes as may be required pursuant to any law or governmental regulation
or ruling.
6.3 Notices. For purposes of this Agreement, all notices and
other communications provided for herein shall be in writing and shall be
deemed to have been duly given when personally delivered or when mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
<PAGE> 11
If to the Company, to: Hadson Corporation
2777 Stemmons Freeway, Suite 700
Dallas, TX 75207
Attention: President & CEO
If to Employee, to: Kathleen M. Eisbrenner
2777 Stemmons Freeway, Suite 700
Dallas, TX 75207
or to such other address as either such party may furnish to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
6.4 Applicable Law. This Agreement is entered into under and
shall be governed by, and construed and interpreted in accordance with, the
laws of the State of Texas.
6.5 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
6.6 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision shall not affect the validity
or enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
6.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
6.8 Headings. The paragraph headings in this Agreement have been
inserted for purposes of convenience and shall not be used for interpretive
purposes.
6.9 Affiliate. As used in this Agreement, "affiliate" shall mean
any entity which, directly or indirectly, owns or controls, is owned or
controlled by, or is under common ownership or control with, the Company.
6.10 Assignment. The rights and obligations of Employee hereunder
are personal and no right, benefit or obligation of Employee hereunder shall be
subject to voluntary or involuntary assignment, alienation or transfer, whether
by operation of law or otherwise,without the prior written consent of the
Company. Subject to the provisions of the preceding sentence, this Agreement
shall be binding
<PAGE> 12
upon, and inure to the benefit of, the parties hereto and their respective
heirs, administrators, executors, successors and assigns.
6.11 Term. This Agreement has a term co-extensive with the term of
employment specified in paragraph 2.1 hereof (without giving effect to the
third sentence thereof), provided that (a) except as otherwise provided herein.
termination shall not affect any right or obligation of any party which is
accrued or vested prior to or upon such termination and (b) the provisions of
Article 5 hereof shall survive the termination of this Agreement.
6.12 Entire Agreement. Except as provided in (a) written policies
and procedures promulgated by the Company that are applicable to executive
officers of the Company,(b) the written benefit plans and programs referenced
in Article 3 hereof or (c) any signed written agreements hereafter executed by
the Company and Employee, this Agreement constitutes the entire agreement of
the parties with regard to such subject matters, and contains all of the
covenants, promises, representations, warranties and agreements between the
parties with respect to such subject matters and replaces and merges previous
agreements and discussions pertaining to the employment relationship between
the Company and Employee. Any modification or waiver of any provision of this
Agreement will be effective only if it is in writing and signed by both of the
parties hereto.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement effective as of the Effective Date.
HADSON CORPORATION
/s/ Greg G. Jenkins
By Greg G. Jenkins,
President & CEO
/s/ Kathleen M. Eisbrenner
Kathleen M. Eisbrenner
<PAGE> 1
Exhibit 10.13
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 5th day
of December, 1994, by and between Hadson Corporation, a Delaware corporation
(the "Company"), and J. Michael Adcock (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity and has asked the
Indemnitee to serve as a member of a special committee of the Board of
Directors of the Company (the "Special Committee"). The Company believes that
the Indemnitee's undertaking of such additional responsibilities is important
to the Company and that the protection afforded by this Agreement will enhance
the Indemnitee's ability to discharge such responsibilities under existing
circumstances. The Indemnitee is willing, subject to certain conditions
including without limitation the execution and performance of this Agreement by
the Company and the Company's agreement to provide the Indemnitee at all times
the broadest and most favorable (to Indemnitee) possible indemnification
permitted by applicable law (whether by legislative action or judicial
decision), to continue in that capacity (including as a member of the Special
Committee).
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company, however,
may be unable to obtain such insurance, and, if obtained, there can be no
assurance as to the continuation or renewal thereof, or that any such insurance
will provide coverage for losses to which the Indemnitee may be exposed and for
which he or she may be permitted to be indemnified under the General
Corporation Law of the State of Delaware (the "DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities (including as a member of the Special
Committee), the Company and the Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
<PAGE> 2
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than a Proceeding
by or in the right of the Company), by reason of the fact that he or she is or
was or had agreed to become a director (including service as a member of the
Special Committee), officer, employee or agent of the Company, or is or was
serving or had agreed to serve at the request of the Company as a director
(including service as a member of the Special Committee), officer, partner,
member, trustee, employee or agent (each an "Authorized Capacity") of another
corporation, partnership, joint venture, trust or other enterprise (each
"Another Entity"), or by reason of any action alleged to have been taken or
omitted in such capacity (including as a member of the Special Committee),
against any and all costs, charges and expenses (including attorneys' and
others' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such Proceeding if the
Indemnitee acted in good faith and in a manner that he or she reasonably
believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal Proceeding, the Indemnitee had no reasonable cause
to believe his or her conduct was unlawful. The termination of any Proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent will not, of itself, adversely affect the right of the
Indemnitee to indemnification or create a presumption that the Indemnitee did
not meet the foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
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<PAGE> 3
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth in Section 2(a)
and Section 2(b) (the "Indemnification Standards"). Such determination will be
made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs and expenses, including
expenses of investigation, preparation, defense and settlement of Proceedings
and expenses of appeal, attachment or similar bonds; provided, however, that
the Company will not be obligated under this Section 3(a) to make any payment
in connection with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"),
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<PAGE> 4
and profits arising from transactions in securities which were
effected in violation of Section 10(b) or Section 14(e) of the
Exchange Act, including Rule 10b-5 or Rule 14e-3 promulgated
thereunder.
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law
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<PAGE> 5
firm (x) that neither at the time in question nor in the five years immediately
preceding such time has been retained to represent (A) the Company (or any of
its affiliates) or the Indemnitee in any matter material to either such party
or (B) any other party to the Proceeding or claim giving rise to a claim for
indemnification under this Agreement, (y) that, under the applicable standards
of professional conduct then prevailing under the law of the State of Delaware,
would not be precluded from representing either the Company or the Indemnitee
in an action to determine the Indemnitee's rights under this Agreement and (z)
to which the Indemnitee or the Company, acting therein through a majority of
the Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company, the
Indemnitee shall select another independent legal counsel subject to similar
reasonable objection until independent legal counsel is agreed upon. The
Company will pay the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding
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<PAGE> 6
and (ii), if and to the extent required by law at the time of such advance, he
or she undertakes to repay such amounts advanced as to which it may ultimately
be determined that the Indemnitee is not entitled. In order to obtain
advancement of expenses pursuant to Section 3(b), the Indemnitee may submit an
Undertaking or, if the Indemnitee chooses not to submit an Undertaking, shall
submit such other form of request as he or she determines to be appropriate (an
"Expense Request"). Upon receipt of an Undertaking or Expense Request, as the
case may be, the Company will within 5 calendar days make payment of the costs,
charges and expenses stated in the Undertaking or Expense Request. No security
will be required in connection with any Undertaking or Expense Request and any
Undertaking or Expense Request will be accepted, and all such payments shall be
made, without reference to the Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine
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<PAGE> 7
the Indemnitee's entitlement to indemnification) to have made a determination
prior to commencement of such action that indemnification of the Indemnitee is
proper in the circumstances because he or she has met the applicable standard
of conduct set forth in the DGCL nor an actual determination by the Company
(including any person or persons empowered under Section 4(b) to determine the
Indemnitee's entitlement to indemnification) that the Indemnitee has not met
such applicable standard of conduct will be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined below)
of
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<PAGE> 8
the Company, (a) the Company will require (if it is not the surviving,
resulting or acquiring corporation therein) the surviving, resulting or
acquiring corporation expressly to assume the Company's obligations under this
Agreement and to agree to indemnify the Indemnitee to the full extent provided
herein and (b), whether or not the Company is the resulting, surviving or
acquiring corporation in any such transaction (or Change of Control), the
Indemnitee will also stand in the same position under this Agreement with
respect to the resulting, surviving or acquiring corporation as he or she would
have with respect to the Company if the transaction (or Change of Control) had
not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of the Indemnitee to indemnity
payments and advancement of expenses under this Agreement or any other
agreement or Certificate (as defined below) or By-law provision now or
hereafter in effect, the Company shall seek legal advice only from independent
legal counsel selected as provided in Section 4(b). Such counsel, among other
things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent the Indemnitee would be permitted to be indemnified
under applicable law. The Company agrees to pay the reasonable fees of such
independent legal counsel and to fully indemnify such counsel against any and
all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for
some or a portion of the costs, charges, expenses, judgments, fines and amounts
paid in settlement of a Proceeding but not, however, for the total amount
thereof, the Company shall nevertheless indemnify the Indemnitee for the
portion thereof to which the Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement of expenses than
that provided under this Agreement as of the date hereof, the Indemnitee will
automatically, without the necessity of any further
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<PAGE> 9
action by the Company or the Indemnitee, be deemed to have such greater right
pursuant to this Agreement. Similarly, the Indemnitee shall have the benefit
of any future changes to the By-Laws or the Certificate of Incorporation of the
Company (the "Certificate") which grant or permit any greater right to
indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate, the
By-Laws, the DGCL or any other applicable law as applied to any act or failure
to act occurring in whole or in part prior to the date upon which any such
amendment was approved by the Board or the stockholders, as the case may be.
Notwithstanding the foregoing, if the Company adopts any amendment to the
Certificate or By-Laws the effect of which is to so deny, diminish or encumber
the Indemnitee's rights to such indemnity, such amendment will apply only to
acts or failures to act occurring entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the Certificate, the By-Laws,
the DGCL, any policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Certificate or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will
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<PAGE> 10
include any excise taxes assessed on the Indemnitee with respect to any
employee benefit plan; and references to "serving at the request of the
Company" will include any service in any capacity which imposes duties on, or
involves services by, the Indemnitee with respect to an employee benefit plan,
its participants or beneficiaries; references to Sections or Exhibits are to
Sections or Exhibits of or to this Agreement; references to the singular will
include the plural and vice versa; and if the Indemnitee acted in good faith
and in a manner he or she reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan he or she will be
deemed to have acted in a "manner not opposed to the best interests of the
Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than Santa Fe
Energy Resources, Inc., together with its affiliates, The Prudential Insurance
Company of America, together with its affiliates, or a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented by the Company's
then outstanding Voting Securities, (2) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (3) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the Company pursuant to this Agreement and
(b) any other director or officer of the Company or person serving at the
request of the Company in an Authorized Capacity of or for Another Entity may
also be subject to liability arising out of such Proceeding or claim and in
connection with such Proceeding or claim seeks indemnification against the
Company pursuant to an agreement similar to this Agreement, the Indemnitee,
together with such other persons, will employ
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<PAGE> 11
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By:/s/ Greg G. Jenkins
Name: Greg G. Jenkins
Title: President
INDEMNITEE
/s/ J. Michael Adcock
Name: J. Michael Adcock
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 5, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of ___________________________________________________________________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
____________________________
Name:_______________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 5, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
_______________________________________.
____________________________
Name:_______________________
<PAGE> 1
Exhibit 10.14
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 5th day
of December, 1994, by and between Hadson Corporation, a Delaware corporation
(the "Company"), and B. M. Thompson (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity and has asked the
Indemnitee to serve as a member of a special committee of the Board of
Directors of the Company (the "Special Committee"). The Company believes that
the Indemnitee's undertaking of such additional responsibilities is important
to the Company and that the protection afforded by this Agreement will enhance
the Indemnitee's ability to discharge such responsibilities under existing
circumstances. The Indemnitee is willing, subject to certain conditions
including without limitation the execution and performance of this Agreement by
the Company and the Company's agreement to provide the Indemnitee at all times
the broadest and most favorable (to Indemnitee) possible indemnification
permitted by applicable law (whether by legislative action or judicial
decision), to continue in that capacity (including as a member of the Special
Committee).
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company, however,
may be unable to obtain such insurance, and, if obtained, there can be no
assurance as to the continuation or renewal thereof, or that any such insurance
will provide coverage for losses to which the Indemnitee may be exposed and for
which he or she may be permitted to be indemnified under the General
Corporation Law of the State of Delaware (the "DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities (including as a member of the Special
Committee), the Company and the Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
<PAGE> 2
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than a Proceeding
by or in the right of the Company), by reason of the fact that he or she is or
was or had agreed to become a director (including service as a member of the
Special Committee), officer, employee or agent of the Company, or is or was
serving or had agreed to serve at the request of the Company as a director
(including service as a member of the Special Committee), officer, partner,
member, trustee, employee or agent (each an "Authorized Capacity") of another
corporation, partnership, joint venture, trust or other enterprise (each
"Another Entity"), or by reason of any action alleged to have been taken or
omitted in such capacity (including as a member of the Special Committee),
against any and all costs, charges and expenses (including attorneys' and
others' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such Proceeding if the
Indemnitee acted in good faith and in a manner that he or she reasonably
believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal Proceeding, the Indemnitee had no reasonable cause
to believe his or her conduct was unlawful. The termination of any Proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent will not, of itself, adversely affect the right of the
Indemnitee to indemnification or create a presumption that the Indemnitee did
not meet the foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
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<PAGE> 3
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth in Section 2(a)
and Section 2(b) (the "Indemnification Standards"). Such determination will be
made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs and expenses, including
expenses of investigation, preparation, defense and settlement of Proceedings
and expenses of appeal, attachment or similar bonds; provided, however, that
the Company will not be obligated under this Section 3(a) to make any payment
in connection with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"),
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<PAGE> 4
and profits arising from transactions in securities which were
effected in violation of Section 10(b) or Section 14(e) of the
Exchange Act, including Rule 10b-5 or Rule 14e-3 promulgated
thereunder.
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law
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<PAGE> 5
firm (x) that neither at the time in question nor in the five years immediately
preceding such time has been retained to represent (A) the Company (or any of
its affiliates) or the Indemnitee in any matter material to either such party
or (B) any other party to the Proceeding or claim giving rise to a claim for
indemnification under this Agreement, (y) that, under the applicable standards
of professional conduct then prevailing under the law of the State of Delaware,
would not be precluded from representing either the Company or the Indemnitee
in an action to determine the Indemnitee's rights under this Agreement and (z)
to which the Indemnitee or the Company, acting therein through a majority of
the Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company, the
Indemnitee shall select another independent legal counsel subject to similar
reasonable objection until independent legal counsel is agreed upon. The
Company will pay the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding
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<PAGE> 6
and (ii), if and to the extent required by law at the time of such advance, he
or she undertakes to repay such amounts advanced as to which it may ultimately
be determined that the Indemnitee is not entitled. In order to obtain
advancement of expenses pursuant to Section 3(b), the Indemnitee may submit an
Undertaking or, if the Indemnitee chooses not to submit an Undertaking, shall
submit such other form of request as he or she determines to be appropriate (an
"Expense Request"). Upon receipt of an Undertaking or Expense Request, as the
case may be, the Company will within 5 calendar days make payment of the costs,
charges and expenses stated in the Undertaking or Expense Request. No security
will be required in connection with any Undertaking or Expense Request and any
Undertaking or Expense Request will be accepted, and all such payments shall be
made, without reference to the Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine
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<PAGE> 7
the Indemnitee's entitlement to indemnification) to have made a determination
prior to commencement of such action that indemnification of the Indemnitee is
proper in the circumstances because he or she has met the applicable standard
of conduct set forth in the DGCL nor an actual determination by the Company
(including any person or persons empowered under Section 4(b) to determine the
Indemnitee's entitlement to indemnification) that the Indemnitee has not met
such applicable standard of conduct will be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined below)
of
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<PAGE> 8
the Company, (a) the Company will require (if it is not the surviving,
resulting or acquiring corporation therein) the surviving, resulting or
acquiring corporation expressly to assume the Company's obligations under this
Agreement and to agree to indemnify the Indemnitee to the full extent provided
herein and (b), whether or not the Company is the resulting, surviving or
acquiring corporation in any such transaction (or Change of Control), the
Indemnitee will also stand in the same position under this Agreement with
respect to the resulting, surviving or acquiring corporation as he or she would
have with respect to the Company if the transaction (or Change of Control) had
not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of the Indemnitee to indemnity
payments and advancement of expenses under this Agreement or any other
agreement or Certificate (as defined below) or By-law provision now or
hereafter in effect, the Company shall seek legal advice only from independent
legal counsel selected as provided in Section 4(b). Such counsel, among other
things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent the Indemnitee would be permitted to be indemnified
under applicable law. The Company agrees to pay the reasonable fees of such
independent legal counsel and to fully indemnify such counsel against any and
all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for
some or a portion of the costs, charges, expenses, judgments, fines and amounts
paid in settlement of a Proceeding but not, however, for the total amount
thereof, the Company shall nevertheless indemnify the Indemnitee for the
portion thereof to which the Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement of expenses than
that provided under this Agreement as of the date hereof, the Indemnitee will
automatically, without the necessity of any further
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<PAGE> 9
action by the Company or the Indemnitee, be deemed to have such greater right
pursuant to this Agreement. Similarly, the Indemnitee shall have the benefit
of any future changes to the By-Laws or the Certificate of Incorporation of the
Company (the "Certificate") which grant or permit any greater right to
indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate, the
By-Laws, the DGCL or any other applicable law as applied to any act or failure
to act occurring in whole or in part prior to the date upon which any such
amendment was approved by the Board or the stockholders, as the case may be.
Notwithstanding the foregoing, if the Company adopts any amendment to the
Certificate or By-Laws the effect of which is to so deny, diminish or encumber
the Indemnitee's rights to such indemnity, such amendment will apply only to
acts or failures to act occurring entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the Certificate, the By-Laws,
the DGCL, any policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Certificate or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will
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<PAGE> 10
include any excise taxes assessed on the Indemnitee with respect to any
employee benefit plan; and references to "serving at the request of the
Company" will include any service in any capacity which imposes duties on, or
involves services by, the Indemnitee with respect to an employee benefit plan,
its participants or beneficiaries; references to Sections or Exhibits are to
Sections or Exhibits of or to this Agreement; references to the singular will
include the plural and vice versa; and if the Indemnitee acted in good faith
and in a manner he or she reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan he or she will be
deemed to have acted in a "manner not opposed to the best interests of the
Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than Santa Fe
Energy Resources, Inc., together with its affiliates, The Prudential Insurance
Company of America, together with its affiliates, or a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented by the Company's
then outstanding Voting Securities, (2) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (3) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the Company pursuant to this Agreement and
(b) any other director or officer of the Company or person serving at the
request of the Company in an Authorized Capacity of or for Another Entity may
also be subject to liability arising out of such Proceeding or claim and in
connection with such Proceeding or claim seeks indemnification against the
Company pursuant to an agreement similar to this Agreement, the Indemnitee,
together with such other persons, will employ
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<PAGE> 11
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ Greg G. Jenkins
Name: Greg G. Jenkins
Title: President
INDEMNITEE
/s/ B.M. Thompson
Name: B. M. Thompson
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 5, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of ____________________________________________________________________________
______________________________________________________________________________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
____________________________
Name:_______________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 5, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ___________________________
______________________________________________________________________________.
____________________________
Name:_______________________
<PAGE> 1
Exhibit 10.15
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 20th
day of December, 1994, by and between Hadson Corporation, a Delaware
corporation (the "Company"), and James L. Payne (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity. The Indemnitee is
willing, subject to certain conditions including without limitation the
execution and performance of this Agreement by the Company and the Company's
agreement to provide the Indemnitee at all times the broadest and most
favorable (to Indemnitee) possible indemnification permitted by applicable law
(whether by legislative action or judicial decision), to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company may,
however, decide not to obtain such insurance, and there can be no assurance as
to whether the Company will obtain such insurance or as to the continuation or
renewal thereof, or that any such insurance will provide coverage for losses to
which the Indemnitee may be exposed and for which he or she may be permitted to
be indemnified under the General Corporation Law of the State of Delaware (the
"DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in to
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities, the Company and Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than
<PAGE> 2
a Proceeding by or in the right of the Company), by reason of the fact that he
or she is or was or had agreed to become a director, officer, employee or agent
of the Company, or is or was serving or had agreed to serve at the request of
the Company as a director, officer, partner, member, trustee, employee or agent
(each an "Authorized Capacity") of another corporation, partnership, joint
venture, trust or other enterprise (each "Another Entity"), or by reason of any
action alleged to have been taken or omitted in such capacity, against any and
all costs, charges and expenses (including attorneys' and others' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such Proceeding if the Indemnitee
acted in good faith and in a manner that he or she reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, the Indemnitee had no reasonable cause to believe his or
her conduct was unlawful. The termination of any Proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent will not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not meet the
foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth
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<PAGE> 3
in Section 2(a) and Section 2(b) (the "Indemnification Standards"). Such
determination will be made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs, expenses, expenses of
investigation, preparation, defense and settlement of Proceedings, and expenses
of appeal, attachment or similar bonds; provided, however, that the Company
will not be obligated under this Section 3(a) to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from
transactions in securities which were effected in violation of
Section 10(b) or Section 14(e) of the Exchange Act, including
Rule 10b-5 or Rule 14e-3 promulgated thereunder.
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<PAGE> 4
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law firm (x) that neither at the time
in question nor in the five years immediately preceding such time has been
retained to represent (A) the Company (or any of its affiliates) or the
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<PAGE> 5
Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding or claim giving rise to a claim for indemnification under
this Agreement, (y) that, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would not be
precluded from representing either the Company or the Indemnitee in an action
to determine the Indemnitee's rights under this Agreement and (z) to which the
Indemnitee or the Company, acting therein through a majority of the
Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company shall
select another independent legal counsel subject to similar reasonable
objection until independent legal counsel is agreed upon. The Company will pay
the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding and
(ii), if and to the extent required by law at the time of such
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<PAGE> 6
advance, he or she undertakes to repay such amounts advanced as to which it may
ultimately be determined that the Indemnitee is not entitled. In order to
obtain advancement of expenses pursuant to Section 3(b), the Indemnitee may
submit an Undertaking or, if the Indemnitee chooses not to submit an
Undertaking, shall submit such other form of request as he or she determines to
be appropriate (an "Expense Request"). Upon receipt of an Undertaking or
Expense Request, as the case may be, the Company will within 5 calendar days
make payment of the costs, charges and expenses stated in the Undertaking or
Expense Request. No security will be required in connection with any
Undertaking or Expense Request and any Undertaking or Expense Request will be
accepted, and all such payments shall be made, without reference to the
Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine the Indemnitee's entitlement to
indemnification) to have made
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<PAGE> 7
a determination prior to commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL nor an actual
determination by the Company (including any person or persons empowered under
Section 4(b) to determine the Indemnitee's entitlement to indemnification) that
the Indemnitee has not met such applicable standard of conduct will be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined
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<PAGE> 8
below) of the Company, (a) the Company will require (if it is not the
surviving, resulting or acquiring corporation therein) the surviving, resulting
or acquiring corporation expressly to assume the Company's obligations under
this Agreement and to agree to indemnify the Indemnitee to the full extent
provided herein and (b), whether or not the Company is the resulting, surviving
or acquiring corporation in any such transaction (or change of control of the
Company), the Indemnitee will also stand in the same position under this
Agreement with respect to the resulting, surviving or acquiring corporation as
he or she would have with respect to the Company if the transaction (or change
of control of the Company) had not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and advancement of expenses under this Agreement or any other agreement or
Charter or By-law provision now or hereafter in effect, the Company shall seek
legal advice only from independent legal counsel selected as provided in
Section 4(b). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of such independent legal counsel and
to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the costs, charges, expenses, judgments, fines and amounts paid in
settlement of a Proceeding but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement
-8-
<PAGE> 9
of expenses than that provided under this Agreement as of the date hereof, the
Indemnitee will automatically, without the necessity of any further action by
the Company or the Indemnitee, be deemed to have such greater right pursuant to
this Agreement. Similarly, the Indemnitee shall have the benefit of any future
changes to the By-Laws or the Certificate (as defined below) which grant or
permit any greater right to indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate of
Incorporation of the Company (the "Certificate"), By-Laws, the DGCL or any
other applicable law as applied to any act or failure to act occurring in whole
or in part prior to the date upon which any such amendment was approved by the
Board or the stockholders, as the case may be. Notwithstanding the foregoing,
if the Company adopts any amendment to the Certificate or By-Laws the effect of
which is to so deny, diminish or encumber the Indemnitee's rights to such
indemnity, such amendment will apply only to acts or failures to act occurring
entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the By-Laws, the DGCL, any
policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Charter or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
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<PAGE> 10
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will include any excise
taxes assessed on the Indemnitee with respect to any employee benefit plan; and
references to "serving at the request of the Company" will include any service
in any capacity which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries; references to Sections or Exhibits are to Sections or Exhibits
of or to this Agreement; references to the singular will include the plural and
vice versa; and if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he or she will be deemed to have acted in a "manner
not opposed to the best interests of the Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than Santa Fe Energy Resources, Inc., together with its
affiliates, The Prudential Insurance Company of America, together with its
affiliates, or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing [20%] or more of the
total voting power represented by the Company's then outstanding Voting
Securities, (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the
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<PAGE> 11
Company pursuant to this Agreement and (b) any other director or officer of the
Company or person serving at the request of the Company in an Authorized
Capacity of or for Another Entity may also be subject to liability arising out
of such Proceeding or claim and in connection with such Proceeding or claim
seeks indemnification against the Company pursuant to an agreement similar to
this Agreement, the Indemnitee, together with such other persons, will employ
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ GREG G. JENKINS
Name: Greg G. Jenkins
Title: President and
Chief Executive Officer
INDEMNITEE
/s/ JAMES L. PAYNE
Name: James L. Payne
Director
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 20, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of______________________________________________________________________________
________________________________________________________________________________
_____________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
________________________________________
Name:___________________________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 20, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
_______________________________________________________________________________
_________________________.
________________________________________
Name:___________________________________
<PAGE> 1
Exhibit 10.16
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 20th
day of December, 1994, by and between Hadson Corporation, a Delaware
corporation (the "Company"), and Michael J. Rosinski (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity. The Indemnitee is
willing, subject to certain conditions including without limitation the
execution and performance of this Agreement by the Company and the Company's
agreement to provide the Indemnitee at all times the broadest and most
favorable (to Indemnitee) possible indemnification permitted by applicable law
(whether by legislative action or judicial decision), to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company may,
however, decide not to obtain such insurance, and there can be no assurance as
to whether the Company will obtain such insurance or as to the continuation or
renewal thereof, or that any such insurance will provide coverage for losses to
which the Indemnitee may be exposed and for which he or she may be permitted to
be indemnified under the General Corporation Law of the State of Delaware (the
"DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in to
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities, the Company and Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than
<PAGE> 2
a Proceeding by or in the right of the Company), by reason of the fact that he
or she is or was or had agreed to become a director, officer, employee or agent
of the Company, or is or was serving or had agreed to serve at the request of
the Company as a director, officer, partner, member, trustee, employee or agent
(each an "Authorized Capacity") of another corporation, partnership, joint
venture, trust or other enterprise (each "Another Entity"), or by reason of any
action alleged to have been taken or omitted in such capacity, against any and
all costs, charges and expenses (including attorneys' and others' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such Proceeding if the Indemnitee
acted in good faith and in a manner that he or she reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, the Indemnitee had no reasonable cause to believe his or
her conduct was unlawful. The termination of any Proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent will not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not meet the
foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth
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<PAGE> 3
in Section 2(a) and Section 2(b) (the "Indemnification Standards"). Such
determination will be made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs, expenses, expenses of
investigation, preparation, defense and settlement of Proceedings, and expenses
of appeal, attachment or similar bonds; provided, however, that the Company
will not be obligated under this Section 3(a) to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from
transactions in securities which were effected in violation of
Section 10(b) or Section 14(e) of the Exchange Act, including
Rule 10b-5 or Rule 14e-3 promulgated thereunder.
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<PAGE> 4
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law firm (x) that neither at the time
in question nor in the five years immediately preceding such time has been
retained to represent (A) the Company (or any of its affiliates) or the
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<PAGE> 5
Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding or claim giving rise to a claim for indemnification under
this Agreement, (y) that, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would not be
precluded from representing either the Company or the Indemnitee in an action
to determine the Indemnitee's rights under this Agreement and (z) to which the
Indemnitee or the Company, acting therein through a majority of the
Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company shall
select another independent legal counsel subject to similar reasonable
objection until independent legal counsel is agreed upon. The Company will pay
the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding and
(ii), if and to the extent required by law at the time of such
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<PAGE> 6
advance, he or she undertakes to repay such amounts advanced as to which it may
ultimately be determined that the Indemnitee is not entitled. In order to
obtain advancement of expenses pursuant to Section 3(b), the Indemnitee may
submit an Undertaking or, if the Indemnitee chooses not to submit an
Undertaking, shall submit such other form of request as he or she determines to
be appropriate (an "Expense Request"). Upon receipt of an Undertaking or
Expense Request, as the case may be, the Company will within 5 calendar days
make payment of the costs, charges and expenses stated in the Undertaking or
Expense Request. No security will be required in connection with any
Undertaking or Expense Request and any Undertaking or Expense Request will be
accepted, and all such payments shall be made, without reference to the
Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine the Indemnitee's entitlement to
indemnification) to have made
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<PAGE> 7
a determination prior to commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL nor an actual
determination by the Company (including any person or persons empowered under
Section 4(b) to determine the Indemnitee's entitlement to indemnification) that
the Indemnitee has not met such applicable standard of conduct will be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined
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<PAGE> 8
below) of the Company, (a) the Company will require (if it is not the
surviving, resulting or acquiring corporation therein) the surviving, resulting
or acquiring corporation expressly to assume the Company's obligations under
this Agreement and to agree to indemnify the Indemnitee to the full extent
provided herein and (b), whether or not the Company is the resulting, surviving
or acquiring corporation in any such transaction (or change of control of the
Company), the Indemnitee will also stand in the same position under this
Agreement with respect to the resulting, surviving or acquiring corporation as
he or she would have with respect to the Company if the transaction (or change
of control of the Company) had not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and advancement of expenses under this Agreement or any other agreement or
Charter or By-law provision now or hereafter in effect, the Company shall seek
legal advice only from independent legal counsel selected as provided in
Section 4(b). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of such independent legal counsel and
to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the costs, charges, expenses, judgments, fines and amounts paid in
settlement of a Proceeding but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement
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<PAGE> 9
of expenses than that provided under this Agreement as of the date hereof, the
Indemnitee will automatically, without the necessity of any further action by
the Company or the Indemnitee, be deemed to have such greater right pursuant to
this Agreement. Similarly, the Indemnitee shall have the benefit of any future
changes to the By-Laws or the Certificate (as defined below) which grant or
permit any greater right to indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate of
Incorporation of the Company (the "Certificate"), By-Laws, the DGCL or any
other applicable law as applied to any act or failure to act occurring in whole
or in part prior to the date upon which any such amendment was approved by the
Board or the stockholders, as the case may be. Notwithstanding the foregoing,
if the Company adopts any amendment to the Certificate or By-Laws the effect of
which is to so deny, diminish or encumber the Indemnitee's rights to such
indemnity, such amendment will apply only to acts or failures to act occurring
entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the By-Laws, the DGCL, any
policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Charter or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
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<PAGE> 10
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will include any excise
taxes assessed on the Indemnitee with respect to any employee benefit plan; and
references to "serving at the request of the Company" will include any service
in any capacity which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries; references to Sections or Exhibits are to Sections or Exhibits
of or to this Agreement; references to the singular will include the plural and
vice versa; and if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he or she will be deemed to have acted in a "manner
not opposed to the best interests of the Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than Santa Fe Energy Resources, Inc., together with its
affiliates, The Prudential Insurance Company of America, together with its
affiliates, or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing [20%] or more of the
total voting power represented by the Company's then outstanding Voting
Securities, (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the
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<PAGE> 11
Company pursuant to this Agreement and (b) any other director or officer of the
Company or person serving at the request of the Company in an Authorized
Capacity of or for Another Entity may also be subject to liability arising out
of such Proceeding or claim and in connection with such Proceeding or claim
seeks indemnification against the Company pursuant to an agreement similar to
this Agreement, the Indemnitee, together with such other persons, will employ
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ GREG G. JENKINS
Name: Greg G. Jenkins
Title: President and
Chief Executive Officer
INDEMNITEE
/s/ MICHAEL J. ROSINSKI
Name: Michael J. Rosinski
Director
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 20, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of _____________________________________________________________________________
________________________________________________________________________________
_____________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
________________________________________
Name:___________________________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 20, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
_______________________________________________________________________________
__________________________.
________________________________________
Name:___________________________________
<PAGE> 1
Exhibit 10.17
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 5th day
of December, 1994, by and between Hadson Corporation, a Delaware corporation
(the "Company"), and J. Frank Haasbeek (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity and has asked the
Indemnitee to serve as a member of a special committee of the Board of
Directors of the Company (the "Special Committee"). The Company believes that
the Indemnitee's undertaking of such additional responsibilities is important
to the Company and that the protection afforded by this Agreement will enhance
the Indemnitee's ability to discharge such responsibilities under existing
circumstances. The Indemnitee is willing, subject to certain conditions
including without limitation the execution and performance of this Agreement by
the Company and the Company's agreement to provide the Indemnitee at all times
the broadest and most favorable (to Indemnitee) possible indemnification
permitted by applicable law (whether by legislative action or judicial
decision), to continue in that capacity (including as a member of the Special
Committee).
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company, however,
may be unable to obtain such insurance, and, if obtained, there can be no
assurance as to the continuation or renewal thereof, or that any such insurance
will provide coverage for losses to which the Indemnitee may be exposed and for
which he or she may be permitted to be indemnified under the General
Corporation Law of the State of Delaware (the "DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities (including as a member of the Special
Committee), the Company and the Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
<PAGE> 2
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than a Proceeding
by or in the right of the Company), by reason of the fact that he or she is or
was or had agreed to become a director (including service as a member of the
Special Committee), officer, employee or agent of the Company, or is or was
serving or had agreed to serve at the request of the Company as a director
(including service as a member of the Special Committee), officer, partner,
member, trustee, employee or agent (each an "Authorized Capacity") of another
corporation, partnership, joint venture, trust or other enterprise (each
"Another Entity"), or by reason of any action alleged to have been taken or
omitted in such capacity (including as a member of the Special Committee),
against any and all costs, charges and expenses (including attorneys' and
others' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such Proceeding if the
Indemnitee acted in good faith and in a manner that he or she reasonably
believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal Proceeding, the Indemnitee had no reasonable cause
to believe his or her conduct was unlawful. The termination of any Proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent will not, of itself, adversely affect the right of the
Indemnitee to indemnification or create a presumption that the Indemnitee did
not meet the foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
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<PAGE> 3
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth in Section 2(a)
and Section 2(b) (the "Indemnification Standards"). Such determination will be
made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs and expenses, including
expenses of investigation, preparation, defense and settlement of Proceedings
and expenses of appeal, attachment or similar bonds; provided, however, that
the Company will not be obligated under this Section 3(a) to make any payment
in connection with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"),
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<PAGE> 4
and profits arising from transactions in securities which were
effected in violation of Section 10(b) or Section 14(e) of the
Exchange Act, including Rule 10b-5 or Rule 14e-3 promulgated
thereunder.
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law
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<PAGE> 5
firm (x) that neither at the time in question nor in the five years immediately
preceding such time has been retained to represent (A) the Company (or any of
its affiliates) or the Indemnitee in any matter material to either such party
or (B) any other party to the Proceeding or claim giving rise to a claim for
indemnification under this Agreement, (y) that, under the applicable standards
of professional conduct then prevailing under the law of the State of Delaware,
would not be precluded from representing either the Company or the Indemnitee
in an action to determine the Indemnitee's rights under this Agreement and (z)
to which the Indemnitee or the Company, acting therein through a majority of
the Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company, the
Indemnitee shall select another independent legal counsel subject to similar
reasonable objection until independent legal counsel is agreed upon. The
Company will pay the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding
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<PAGE> 6
and (ii), if and to the extent required by law at the time of such advance, he
or she undertakes to repay such amounts advanced as to which it may ultimately
be determined that the Indemnitee is not entitled. In order to obtain
advancement of expenses pursuant to Section 3(b), the Indemnitee may submit an
Undertaking or, if the Indemnitee chooses not to submit an Undertaking, shall
submit such other form of request as he or she determines to be appropriate (an
"Expense Request"). Upon receipt of an Undertaking or Expense Request, as the
case may be, the Company will within 5 calendar days make payment of the costs,
charges and expenses stated in the Undertaking or Expense Request. No security
will be required in connection with any Undertaking or Expense Request and any
Undertaking or Expense Request will be accepted, and all such payments shall be
made, without reference to the Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine
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<PAGE> 7
the Indemnitee's entitlement to indemnification) to have made a determination
prior to commencement of such action that indemnification of the Indemnitee is
proper in the circumstances because he or she has met the applicable standard
of conduct set forth in the DGCL nor an actual determination by the Company
(including any person or persons empowered under Section 4(b) to determine the
Indemnitee's entitlement to indemnification) that the Indemnitee has not met
such applicable standard of conduct will be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined below)
of
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<PAGE> 8
the Company, (a) the Company will require (if it is not the surviving,
resulting or acquiring corporation therein) the surviving, resulting or
acquiring corporation expressly to assume the Company's obligations under this
Agreement and to agree to indemnify the Indemnitee to the full extent provided
herein and (b), whether or not the Company is the resulting, surviving or
acquiring corporation in any such transaction (or Change of Control), the
Indemnitee will also stand in the same position under this Agreement with
respect to the resulting, surviving or acquiring corporation as he or she would
have with respect to the Company if the transaction (or Change of Control) had
not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of the Indemnitee to indemnity
payments and advancement of expenses under this Agreement or any other
agreement or Certificate (as defined below) or By-law provision now or
hereafter in effect, the Company shall seek legal advice only from independent
legal counsel selected as provided in Section 4(b). Such counsel, among other
things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent the Indemnitee would be permitted to be indemnified
under applicable law. The Company agrees to pay the reasonable fees of such
independent legal counsel and to fully indemnify such counsel against any and
all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for
some or a portion of the costs, charges, expenses, judgments, fines and amounts
paid in settlement of a Proceeding but not, however, for the total amount
thereof, the Company shall nevertheless indemnify the Indemnitee for the
portion thereof to which the Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement of expenses than
that provided under this Agreement as of the date hereof, the Indemnitee will
automatically, without the necessity of any further
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<PAGE> 9
action by the Company or the Indemnitee, be deemed to have such greater right
pursuant to this Agreement. Similarly, the Indemnitee shall have the benefit
of any future changes to the By-Laws or the Certificate of Incorporation of the
Company (the "Certificate") which grant or permit any greater right to
indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate, the
By-Laws, the DGCL or any other applicable law as applied to any act or failure
to act occurring in whole or in part prior to the date upon which any such
amendment was approved by the Board or the stockholders, as the case may be.
Notwithstanding the foregoing, if the Company adopts any amendment to the
Certificate or By-Laws the effect of which is to so deny, diminish or encumber
the Indemnitee's rights to such indemnity, such amendment will apply only to
acts or failures to act occurring entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the Certificate, the By-Laws,
the DGCL, any policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Certificate or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will
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<PAGE> 10
include any excise taxes assessed on the Indemnitee with respect to any
employee benefit plan; and references to "serving at the request of the
Company" will include any service in any capacity which imposes duties on, or
involves services by, the Indemnitee with respect to an employee benefit plan,
its participants or beneficiaries; references to Sections or Exhibits are to
Sections or Exhibits of or to this Agreement; references to the singular will
include the plural and vice versa; and if the Indemnitee acted in good faith
and in a manner he or she reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan he or she will be
deemed to have acted in a "manner not opposed to the best interests of the
Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than Santa Fe
Energy Resources, Inc., together with its affiliates, The Prudential Insurance
Company of America, together with its affiliates, or a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented by the Company's
then outstanding Voting Securities, (2) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (3) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities"shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the Company pursuant to this Agreement and
(b) any other director or officer of the Company or person serving at the
request of the Company in an Authorized Capacity of or for Another Entity may
also be subject to liability arising out of such Proceeding or claim and in
connection with such Proceeding or claim seeks indemnification against the
Company pursuant to an agreement similar to this Agreement, the Indemnitee,
together with such other persons, will employ
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<PAGE> 11
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ Greg G. Jenkins
Name: Greg G. Jenkins
Title: President
INDEMNITEE
/s/ J. Frank Haasbeek
Name: J. Frank Haasbeek
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 5, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of ____________________________________________________________________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
____________________________
Name:_______________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 5, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
______________________________________________________________________________.
____________________________
Name:_______________________
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Exhibit 10.18
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 20th
day of December, 1994, by and between Hadson Corporation, a Delaware
corporation (the "Company"), and R. A. Walker (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity. The Indemnitee is
willing, subject to certain conditions including without limitation the
execution and performance of this Agreement by the Company and the Company's
agreement to provide the Indemnitee at all times the broadest and most
favorable (to Indemnitee) possible indemnification permitted by applicable law
(whether by legislative action or judicial decision), to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company may,
however, decide not to obtain such insurance, and there can be no assurance as
to whether the Company will obtain such insurance or as to the continuation or
renewal thereof, or that any such insurance will provide coverage for losses to
which the Indemnitee may be exposed and for which he or she may be permitted to
be indemnified under the General Corporation Law of the State of Delaware (the
"DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in to
continuing to serve the Company or Another Entity in his or her present
capacity and in und1ertaking to serve the Company or Another Entity in any
additional capacity or capacities, the Company and Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than
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a Proceeding by or in the right of the Company), by reason of the fact that he
or she is or was or had agreed to become a director, officer, employee or agent
of the Company, or is or was serving or had agreed to serve at the request of
the Company as a director, officer, partner, member, trustee, employee or agent
(each an "Authorized Capacity") of another corporation, partnership, joint
venture, trust or other enterprise (each "Another Entity"), or by reason of any
action alleged to have been taken or omitted in such capacity, against any and
all costs, charges and expenses (including attorneys' and others' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such Proceeding if the Indemnitee
acted in good faith and in a manner that he or she reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, the Indemnitee had no reasonable cause to believe his or
her conduct was unlawful. The termination of any Proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent will not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not meet the
foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth
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in Section 2(a) and Section 2(b) (the "Indemnification Standards"). Such
determination will be made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs, expenses, expenses of
investigation, preparation, defense and settlement of Proceedings, and expenses
of appeal, attachment or similar bonds; provided, however, that the Company
will not be obligated under this Section 3(a) to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from
transactions in securities which were effected in violation of
Section 10(b) or Section 14(e) of the Exchange Act, including
Rule 10b-5 or Rule 14e-3 promulgated thereunder.
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The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law firm (x) that neither at the time
in question nor in the five years immediately preceding such time has been
retained to represent (A) the Company (or any of its affiliates) or the
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Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding or claim giving rise to a claim for indemnification under
this Agreement, (y) that, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would not be
precluded from representing either the Company or the Indemnitee in an action
to determine the Indemnitee's rights under this Agreement and (z) to which the
Indemnitee or the Company, acting therein through a majority of the
Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company shall
select another independent legal counsel subject to similar reasonable
objection until independent legal counsel is agreed upon. The Company will pay
the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding and
(ii), if and to the extent required by law at the time of such
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advance, he or she undertakes to repay such amounts advanced as to which it may
ultimately be determined that the Indemnitee is not entitled. In order to
obtain advancement of expenses pursuant to Section 3(b), the Indemnitee may
submit an Undertaking or, if the Indemnitee chooses not to submit an
Undertaking, shall submit such other form of request as he or she determines to
be appropriate (an "Expense Request"). Upon receipt of an Undertaking or
Expense Request, as the case may be, the Company will within 5 calendar days
make payment of the costs, charges and expenses stated in the Undertaking or
Expense Request. No security will be required in connection with any
Undertaking or Expense Request and any Undertaking or Expense Request will be
accepted, and all such payments shall be made, without reference to the
Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine the Indemnitee's entitlement to
indemnification) to have made
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a determination prior to commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL nor an actual
determination by the Company (including any person or persons empowered under
Section 4(b) to determine the Indemnitee's entitlement to indemnification) that
the Indemnitee has not met such applicable standard of conduct will be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined
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below) of the Company, (a) the Company will require (if it is not the
surviving, resulting or acquiring corporation therein) the surviving, resulting
or acquiring corporation expressly to assume the Company's obligations under
this Agreement and to agree to indemnify the Indemnitee to the full extent
provided herein and (b), whether or not the Company is the resulting, surviving
or acquiring corporation in any such transaction (or change of control of the
Company), the Indemnitee will also stand in the same position under this
Agreement with respect to the resulting, surviving or acquiring corporation as
he or she would have with respect to the Company if the transaction (or change
of control of the Company) had not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and advancement of expenses under this Agreement or any other agreement or
Charter or By-law provision now or hereafter in effect, the Company shall seek
legal advice only from independent legal counsel selected as provided in
Section 4(b). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of such independent legal counsel and
to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the costs, charges, expenses, judgments, fines and amounts paid in
settlement of a Proceeding but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement
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of expenses than that provided under this Agreement as of the date hereof, the
Indemnitee will automatically, without the necessity of any further action by
the Company or the Indemnitee, be deemed to have such greater right pursuant to
this Agreement. Similarly, the Indemnitee shall have the benefit of any future
changes to the By-Laws or the Certificate (as defined below) which grant or
permit any greater right to indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate of
Incorporation of the Company (the "Certificate"), By-Laws, the DGCL or any
other applicable law as applied to any act or failure to act occurring in whole
or in part prior to the date upon which any such amendment was approved by the
Board or the stockholders, as the case may be. Notwithstanding the foregoing,
if the Company adopts any amendment to the Certificate or By-Laws the effect of
which is to so deny, diminish or encumber the Indemnitee's rights to such
indemnity, such amendment will apply only to acts or failures to act occurring
entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the By-Laws, the DGCL, any
policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Charter or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
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13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will include any excise
taxes assessed on the Indemnitee with respect to any employee benefit plan; and
references to "serving at the request of the Company" will include any service
in any capacity which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries; references to Sections or Exhibits are to Sections or Exhibits
of or to this Agreement; references to the singular will include the plural and
vice versa; and if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he or she will be deemed to have acted in a "manner
not opposed to the best interests of the Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than Santa Fe Energy Resources, Inc., together with its
affiliates, The Prudential Insurance Company of America, together with its
affiliates, or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing [20%] or more of the
total voting power represented by the Company's then outstanding Voting
Securities, (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the
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<PAGE> 11
Company pursuant to this Agreement and (b) any other director or officer of the
Company or person serving at the request of the Company in an Authorized
Capacity of or for Another Entity may also be subject to liability arising out
of such Proceeding or claim and in connection with such Proceeding or claim
seeks indemnification against the Company pursuant to an agreement similar to
this Agreement, the Indemnitee, together with such other persons, will employ
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ GREG G. JENKINS
Name: Greg G. Jenkins
Title: President and
Chief Executive Officer
INDEMNITEE
/s/ R. A. WALKER
Name: R. A. Walker
Director
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 20, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of______________________________________________________________________________
________________________________________________________________________________
_____________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
________________________________________
Name:___________________________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 20, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
_______________________________________________________________________________
_________________________.
________________________________________
Name:___________________________________
<PAGE> 1
Exhibit 10.19
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 20th
day of December, 1994, by and between Hadson Corporation, a Delaware
corporation (the "Company"), and J. E. Cannon (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity. The Indemnitee is
willing, subject to certain conditions including without limitation the
execution and performance of this Agreement by the Company and the Company's
agreement to provide the Indemnitee at all times the broadest and most
favorable (to Indemnitee) possible indemnification permitted by applicable law
(whether by legislative action or judicial decision), to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company may,
however, decide not to obtain such insurance, and there can be no assurance as
to whether the Company will obtain such insurance or as to the continuation or
renewal thereof, or that any such insurance will provide coverage for losses to
which the Indemnitee may be exposed and for which he or she may be permitted to
be indemnified under the General Corporation Law of the State of Delaware (the
"DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in to
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities, the Company and Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than
<PAGE> 2
a Proceeding by or in the right of the Company), by reason of the fact that he
or she is or was or had agreed to become a director, officer, employee or agent
of the Company, or is or was serving or had agreed to serve at the request of
the Company as a director, officer, partner, member, trustee, employee or agent
(each an "Authorized Capacity") of another corporation, partnership, joint
venture, trust or other enterprise (each "Another Entity"), or by reason of any
action alleged to have been taken or omitted in such capacity, against any and
all costs, charges and expenses (including attorneys' and others' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such Proceeding if the Indemnitee
acted in good faith and in a manner that he or she reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, the Indemnitee had no reasonable cause to believe his or
her conduct was unlawful. The termination of any Proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent will not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not meet the
foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth
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<PAGE> 3
in Section 2(a) and Section 2(b) (the "Indemnification Standards"). Such
determination will be made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs, expenses, expenses of
investigation, preparation, defense and settlement of Proceedings, and expenses
of appeal, attachment or similar bonds; provided, however, that the Company
will not be obligated under this Section 3(a) to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from
transactions in securities which were effected in violation of
Section 10(b) or Section 14(e) of the Exchange Act, including
Rule 10b-5 or Rule 14e-3 promulgated thereunder.
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<PAGE> 4
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law firm (x) that neither at the time
in question nor in the five years immediately preceding such time has been
retained to represent (A) the Company (or any of its affiliates) or the
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<PAGE> 5
Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding or claim giving rise to a claim for indemnification under
this Agreement, (y) that, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would not be
precluded from representing either the Company or the Indemnitee in an action
to determine the Indemnitee's rights under this Agreement and (z) to which the
Indemnitee or the Company, acting therein through a majority of the
Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company shall
select another independent legal counsel subject to similar reasonable
objection until independent legal counsel is agreed upon. The Company will pay
the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding and
(ii), if and to the extent required by law at the time of such
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<PAGE> 6
advance, he or she undertakes to repay such amounts advanced as to which it may
ultimately be determined that the Indemnitee is not entitled. In order to
obtain advancement of expenses pursuant to Section 3(b), the Indemnitee may
submit an Undertaking or, if the Indemnitee chooses not to submit an
Undertaking, shall submit such other form of request as he or she determines to
be appropriate (an "Expense Request"). Upon receipt of an Undertaking or
Expense Request, as the case may be, the Company will within 5 calendar days
make payment of the costs, charges and expenses stated in the Undertaking or
Expense Request. No security will be required in connection with any
Undertaking or Expense Request and any Undertaking or Expense Request will be
accepted, and all such payments shall be made, without reference to the
Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine the Indemnitee's entitlement to
indemnification) to have made
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<PAGE> 7
a determination prior to commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL nor an actual
determination by the Company (including any person or persons empowered under
Section 4(b) to determine the Indemnitee's entitlement to indemnification) that
the Indemnitee has not met such applicable standard of conduct will be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined
-7-
<PAGE> 8
below) of the Company, (a) the Company will require (if it is not the
surviving, resulting or acquiring corporation therein) the surviving, resulting
or acquiring corporation expressly to assume the Company's obligations under
this Agreement and to agree to indemnify the Indemnitee to the full extent
provided herein and (b), whether or not the Company is the resulting, surviving
or acquiring corporation in any such transaction (or change of control of the
Company), the Indemnitee will also stand in the same position under this
Agreement with respect to the resulting, surviving or acquiring corporation as
he or she would have with respect to the Company if the transaction (or change
of control of the Company) had not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and advancement of expenses under this Agreement or any other agreement or
Charter or By-law provision now or hereafter in effect, the Company shall seek
legal advice only from independent legal counsel selected as provided in
Section 4(b). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of such independent legal counsel and
to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the costs, charges, expenses, judgments, fines and amounts paid in
settlement of a Proceeding but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement
-8-
<PAGE> 9
of expenses than that provided under this Agreement as of the date hereof, the
Indemnitee will automatically, without the necessity of any further action by
the Company or the Indemnitee, be deemed to have such greater right pursuant to
this Agreement. Similarly, the Indemnitee shall have the benefit of any future
changes to the By-Laws or the Certificate (as defined below) which grant or
permit any greater right to indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate of
Incorporation of the Company (the "Certificate"), By-Laws, the DGCL or any
other applicable law as applied to any act or failure to act occurring in whole
or in part prior to the date upon which any such amendment was approved by the
Board or the stockholders, as the case may be. Notwithstanding the foregoing,
if the Company adopts any amendment to the Certificate or By-Laws the effect of
which is to so deny, diminish or encumber the Indemnitee's rights to such
indemnity, such amendment will apply only to acts or failures to act occurring
entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the By-Laws, the DGCL, any
policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Charter or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
-9-
<PAGE> 10
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will include any excise
taxes assessed on the Indemnitee with respect to any employee benefit plan; and
references to "serving at the request of the Company" will include any service
in any capacity which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries; references to Sections or Exhibits are to Sections or Exhibits
of or to this Agreement; references to the singular will include the plural and
vice versa; and if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he or she will be deemed to have acted in a "manner
not opposed to the best interests of the Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than Santa Fe Energy Resources, Inc., together with its
affiliates, The Prudential Insurance Company of America, together with its
affiliates, or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing [20%] or more of the
total voting power represented by the Company's then outstanding Voting
Securities, (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the
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<PAGE> 11
Company pursuant to this Agreement and (b) any other director or officer of the
Company or person serving at the request of the Company in an Authorized
Capacity of or for Another Entity may also be subject to liability arising out
of such Proceeding or claim and in connection with such Proceeding or claim
seeks indemnification against the Company pursuant to an agreement similar to
this Agreement, the Indemnitee, together with such other persons, will employ
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ GREG G. JENKINS
Name: Greg G. Jenkins
Title: President and
Chief Executive Officer
INDEMNITEE
/s/ J. E. CANNON
Name: J. E. Cannon
Chairman of the Board
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 20, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of______________________________________________________________________________
________________________________________________________________________________
_____________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
________________________________________
Name:___________________________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 20, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
_______________________________________________________________________________
________________________.
________________________________________
Name:___________________________________
<PAGE> 1
Exhibit 10.20
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 20th
day of December, 1994, by and between Hadson Corporation, a Delaware
corporation (the "Company"), and Greg G. Jenkins (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity. The Indemnitee is
willing, subject to certain conditions including without limitation the
execution and performance of this Agreement by the Company and the Company's
agreement to provide the Indemnitee at all times the broadest and most
favorable (to Indemnitee) possible indemnification permitted by applicable law
(whether by legislative action or judicial decision), to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company may,
however, decide not to obtain such insurance, and there can be no assurance as
to whether the Company will obtain such insurance or as to the continuation or
renewal thereof, or that any such insurance will provide coverage for losses to
which the Indemnitee may be exposed and for which he or she may be permitted to
be indemnified under the General Corporation Law of the State of Delaware (the
"DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in to
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities, the Company and Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than
<PAGE> 2
a Proceeding by or in the right of the Company), by reason of the fact that he
or she is or was or had agreed to become a director, officer, employee or agent
of the Company, or is or was serving or had agreed to serve at the request of
the Company as a director, officer, partner, member, trustee, employee or agent
(each an "Authorized Capacity") of another corporation, partnership, joint
venture, trust or other enterprise (each "Another Entity"), or by reason of any
action alleged to have been taken or omitted in such capacity, against any and
all costs, charges and expenses (including attorneys' and others' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such Proceeding if the Indemnitee
acted in good faith and in a manner that he or she reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, the Indemnitee had no reasonable cause to believe his or
her conduct was unlawful. The termination of any Proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent will not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not meet the
foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth
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<PAGE> 3
in Section 2(a) and Section 2(b) (the "Indemnification Standards"). Such
determination will be made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs, expenses, expenses of
investigation, preparation, defense and settlement of Proceedings, and expenses
of appeal, attachment or similar bonds; provided, however, that the Company
will not be obligated under this Section 3(a) to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from
transactions in securities which were effected in violation of
Section 10(b) or Section 14(e) of the Exchange Act, including
Rule 10b-5 or Rule 14e-3 promulgated thereunder.
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<PAGE> 4
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law firm (x) that neither at the time
in question nor in the five years immediately preceding such time has been
retained to represent (A) the Company (or any of its affiliates) or the
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<PAGE> 5
Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding or claim giving rise to a claim for indemnification under
this Agreement, (y) that, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would not be
precluded from representing either the Company or the Indemnitee in an action
to determine the Indemnitee's rights under this Agreement and (z) to which the
Indemnitee or the Company, acting therein through a majority of the
Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company shall
select another independent legal counsel subject to similar reasonable
objection until independent legal counsel is agreed upon. The Company will pay
the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding and
(ii), if and to the extent required by law at the time of such
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<PAGE> 6
advance, he or she undertakes to repay such amounts advanced as to which it may
ultimately be determined that the Indemnitee is not entitled. In order to
obtain advancement of expenses pursuant to Section 3(b), the Indemnitee may
submit an Undertaking or, if the Indemnitee chooses not to submit an
Undertaking, shall submit such other form of request as he or she determines to
be appropriate (an "Expense Request"). Upon receipt of an Undertaking or
Expense Request, as the case may be, the Company will within 5 calendar days
make payment of the costs, charges and expenses stated in the Undertaking or
Expense Request. No security will be required in connection with any
Undertaking or Expense Request and any Undertaking or Expense Request will be
accepted, and all such payments shall be made, without reference to the
Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine the Indemnitee's entitlement to
indemnification) to have made
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<PAGE> 7
a determination prior to commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL nor an actual
determination by the Company (including any person or persons empowered under
Section 4(b) to determine the Indemnitee's entitlement to indemnification) that
the Indemnitee has not met such applicable standard of conduct will be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined
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<PAGE> 8
below) of the Company, (a) the Company will require (if it is not the
surviving, resulting or acquiring corporation therein) the surviving, resulting
or acquiring corporation expressly to assume the Company's obligations under
this Agreement and to agree to indemnify the Indemnitee to the full extent
provided herein and (b), whether or not the Company is the resulting, surviving
or acquiring corporation in any such transaction (or change of control of the
Company), the Indemnitee will also stand in the same position under this
Agreement with respect to the resulting, surviving or acquiring corporation as
he or she would have with respect to the Company if the transaction (or change
of control of the Company) had not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and advancement of expenses under this Agreement or any other agreement or
Charter or By-law provision now or hereafter in effect, the Company shall seek
legal advice only from independent legal counsel selected as provided in
Section 4(b). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of such independent legal counsel and
to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the costs, charges, expenses, judgments, fines and amounts paid in
settlement of a Proceeding but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement
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<PAGE> 9
of expenses than that provided under this Agreement as of the date hereof, the
Indemnitee will automatically, without the necessity of any further action by
the Company or the Indemnitee, be deemed to have such greater right pursuant to
this Agreement. Similarly, the Indemnitee shall have the benefit of any future
changes to the By-Laws or the Certificate (as defined below) which grant or
permit any greater right to indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate of
Incorporation of the Company (the "Certificate"), By-Laws, the DGCL or any
other applicable law as applied to any act or failure to act occurring in whole
or in part prior to the date upon which any such amendment was approved by the
Board or the stockholders, as the case may be. Notwithstanding the foregoing,
if the Company adopts any amendment to the Certificate or By-Laws the effect of
which is to so deny, diminish or encumber the Indemnitee's rights to such
indemnity, such amendment will apply only to acts or failures to act occurring
entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the By-Laws, the DGCL, any
policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Charter or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
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<PAGE> 10
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will include any excise
taxes assessed on the Indemnitee with respect to any employee benefit plan; and
references to "serving at the request of the Company" will include any service
in any capacity which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries; references to Sections or Exhibits are to Sections or Exhibits
of or to this Agreement; references to the singular will include the plural and
vice versa; and if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he or she will be deemed to have acted in a "manner
not opposed to the best interests of the Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than Santa Fe Energy Resources, Inc., together with its
affiliates, The Prudential Insurance Company of America, together with its
affiliates, or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing [20%] or more of the
total voting power represented by the Company's then outstanding Voting
Securities, (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the
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<PAGE> 11
Company pursuant to this Agreement and (b) any other director or officer of the
Company or person serving at the request of the Company in an Authorized
Capacity of or for Another Entity may also be subject to liability arising out
of such Proceeding or claim and in connection with such Proceeding or claim
seeks indemnification against the Company pursuant to an agreement similar to
this Agreement, the Indemnitee, together with such other persons, will employ
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ ROBERT P. CAPPS
Name: Robert P. Capps
Title: Executive Vice President,
Chief Executive Officer,
Treasurer
INDEMNITEE
/s/ GREG G. JENKINS
Name: Greg G. Jenkins
President and
Chief Executive Officer
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 20, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of _____________________________________________________________________________
________________________________________________________________________________
_____________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
________________________________________
Name:___________________________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 20, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
_______________________________________________________________________________
________________________.
________________________________________
Name:___________________________________
<PAGE> 1
EXHIBIT 10.21
INDEMNITY AGREEMENT
This AGREEMENT made as of the 10th day of November, 1988, by and
between HADSON CORPORATION, a Delaware Corporation (hereinafter called
"Hadson") and ROBERT P. CAPPS (herein called "INDEMNITEE") (sometimes herein
collectively called "the Parties hereto" );
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors or officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since shareholder and derivative lawsuits against
publicly-held corporations, their directors and officers for line-of-duty
decisions and actions have increased in number in recent years for damages in
amounts which have no reasonable or logical relationship to the amount of
compensation received by the directors or officers from the corporation; and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and by-laws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed; and
WHEREAS, damages sought by class action plaintiffs in some cases amount
to tens of millions of dollars and, whether or not the case is meritorious, the
cost of defending them is enormous with few individual directors and officers
having the resources to sustain such legal costs, not to mention the risk of a
judgment running into millions even in cases where the defendant was neither
culpable nor profited personally to the detriment of the corporation; and
WHEREAS, it is generally recognized that the issues in controversy in
such litigation are usually related to the knowledge, motives and intent of the
director or officer and that he is usually the only witness with first-hand
knowledge of the essential facts or of exculpating circumstances who is
qualified to testify in his defense regarding matters of such subjective
nature;and that the long period of time which normally and usually elapses
before such suits can be disposed of can extend beyond the normal time for
retirement for a director or officer with the result that he, after retirement,
or in the event of his death, his spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of himself or his estate against claims for damages; and
<PAGE> 2
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that the continuation of present trends in
litigation against corporate directors and officers will inevitably result in
such directors' less effective direction and supervision of Hadson and its
subsidiaries' and affiliates' business affairs and the operation of their
facilities as opposed to aggressive supervision and management in the search
for profits and the Board deems such consequences to be so detrimental to the
best interests of Hadson's shareholders that it has concluded that its
directors and officers should be provided with maximum protection against
inordinate risks in order to insure that the most capable persons otherwise
available will be attracted to such positions; therefore, said directors have
further concluded that it is not only reasonable and prudent but necessary for
Hadson to contractually obligate itself to indemnify in a reasonable and
adequate manner its directors and officers and the directors and officers of
its affiliates and to assume for itself maximum liability for expenses and
damages in connection with claims lodged against them for their line-of-duty
decisions and actions; and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware under which Hadson is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise, and further specified that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification maybe entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise"; and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity, or arising out of his status as such, whether the corporation
would have the power to indemnify him against such liability under the
provisions of" said laws; and
WHEREAS,Hadson desires to have INDEMNITEE serve or continue to serve
as a director or officer of Hadson or of any other corporation, subsidiary,
partnership, joint venture, or trust or other enterprise (herein called
"AFFILIATE of Hadson") of which he has been or is serving at the request, for
the convenience of or to represent the interests of Hadson, free from undue
concern for unpredictable, inappropriate or unreasonable claims for damages by
reason of his being a director or officer of Hadson or of an AFFILIATE of
Hadson or by reason of his decisions or actions on their behalf; and INDEMNITEE
desires to serve, or to continue to serve, (provided that he is furnished the
indemnity provided for hereinafter), in one or more of such capacities, NOW
THEREFORE:
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<PAGE> 3
WITNESSETH:
THAT for and in consideration of the premises and the covenants
contained herein, Hadson and INDEMNITEE do hereby covenant and agree as
follows:
1. Agreement to Serve. INDEMNITEE will serve and/or continue to
serve, at the will of Hadson or under separate contract,if such exists, Hadson
or an AFFILIATE of Hadson as a director and/or officer faithfully and to the
best of his ability so long as he is duly elected and qualified in accordance
with the provisions of the By-laws thereof or until such time as he tenders his
resignation in writing.
2. Indemnification. Hadson shall indemnify INDEMNITEE:
(a) If INDEMNITEE is a person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of Hadson or an affiliate of Hadson) by reason of the fact that
he is or was a director, officer, employee or agent of Hadson or is or
was serving at the request of Hadson as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise (hereinafter called an AFFILIATE), or by reason of
anything done or not done by him in any such capacity, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with
the investigation, defense or appeal of such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful, or
(b) If INDEMNITEE is a person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of Hadson or an AFFILIATE
of Hadson to procure a judgment in its favor by reason of the fact
that he is or was a director, officer, employee or agent of Hadson, or
is or was serving at the request of Hadson or an AFFILIATE of Hadson,
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or by reason of
anything done or not done by him in any such capacity, against
expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the investigation, defense, settlement or
appeal of such action or suit if he acted in good faith and in a
manner he
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<PAGE> 4
reasonably believed to be in or not opposed to the best interests of
Hadson and except that no indemnification under this subsection shall
be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to Hadson unless and only to
the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper, or
(c) If INDEMNITEE is a person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director,
officer, employee or agent of Hadson or an AFFILIATE of Hadson, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of anything done or
not done by him in any such capacity, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by or for him in connection with the
investigation, defense, appeal or settlement of such action, suit or
proceeding and if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of Hadson, and
prior to, during the pendency or after completion of such suit, action
or proceeding INDEMNITEE is deceased; except that no indemnification
shall be due under the provisions of this subsection to the extent a
court of competent jurisdiction shall have found in such suit, action
or proceeding that INDEMNITEE defrauded or stole from Hadson or an
AFFILIATE of Hadson or converted to his own personal use and benefit
business or properties of Hadson or an AFFILIATE of Hadson or was
guilty of gross negligence or willful misconduct of a culpable nature
to Hadson or an AFFILIATE of Hadson; and
(d) To the extent INDEMNITEE has been successful on the
merits or otherwise in defense of any action, suit or proceedings
referred to in subsections (a), (b) or (c) of this section, or in the
defense of any claim, issue or matter described therein, against
expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the investigation, defense or appeal of such
action, suit or proceeding.
3. Assumption of Liability by Hadson. If INDEMNITEE is deceased
and is entitled to indemnification under any provision
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<PAGE> 5
of this agreement, Hadson shall indemnify INDEMNITEE'S estate and his spouse,
heirs, administrators and executors against, and Hadson shall, and does hereby
agree, to assume any and all expenses (including attorneys' fees), penalties and
fines actually and reasonably incurred by or for INDEMNITEE or his estate,in
connection with the investigation, defense, settlement or appeal of any such
action, suit or proceeding. Further, when requested in writing by the spouse of
INDEMNITEE, and/or the heirs, executors or administrators of INDEMNITEE'S
estate, Hadson shall provide appropriate evidence of Hadson's agreement set out
herein, to indemnify INDEMNITEE against and to itself assume such costs,
liabilities and expenses.
4. Partial Indemnification. If INDEMNITEE is entitled under any
provision of this agreement to indemnification by Hadson for some or a portion
of the expenses, (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in the investigation,
defense, appeal or settlement of such suit, action or proceeding but not,
however, for all of the total amount thereof, Hadson shall nevertheless
indemnify INDEMNITEE of the portion thereof to which INDEMNITEE is entitled.
5. Plea of Nolo Contendere. The termination of any action, suit
or proceeding which is covered by this agreement by judgment, order, settlement
or conviction or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption for the purposes of this agreement that
INDEMNITEE did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of Hadson and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
6. Determination of Right to Indemnification. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not INDEMNITEE has met the standard of conduct required to qualify
and entitle him, partially or fully, to indemnification under the provisions of
any sub-paragraph of Paragraph 2 hereof may be made either by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties of such action, suit or proceeding, by independent legal counsel (who
may be the outside counsel regularly employed by Hadson) or by the stockholders
of Hadson or, where applicable, the AFFILIATE of Hadson, provided that the
manner in which (and, if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Hadson and by INDEMNITEE. In the event that such
parties are unable to agree on the manner in which the determination of the
right to indemnity is to be made, such determination may be made by independent
legal counsel retained by Hadson especially for
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<PAGE> 6
such purpose, provided that such counsel be approved in advance in writing by
both the Board of Directors and INDEMNITEE and provided further, that such
counsel shall not be outside counsel regularly employed by Hadson. In the event
that the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by a lot by the outside counsel
regularly employed by Hadson from among the Oklahoma City, Oklahoma law firms
having more than fifteen attorneys and having a rating of "av" or better in the
then current Martindale-Hubbell Law Directory. Such selection by lot shall be
made in the presence of INDEMNITEE (and his legal counsel or either of them, as
INDEMNITEE may elect). The outside counsel regularly employed by Hadson and
INDEMNITEE (and his legal counsel or either of them, as INDEMNITEE may elect)
shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Hadson, and, if requested by such
counsel, Hadson shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Notwithstanding the foregoing, INDEMNITEE
may, either before or within two (2) years after a determination has been made
as provided above, petition the Court of Chancery of the State of Delaware or
any other court of competent jurisdiction to determine whether INDEMNITEE is
entitled to indemnification under the provisions hereof under which he claims
the right to indemnification, and such court shall thereupon have the exclusive
authority to make such determination unless and until such court dismisses or
otherwise terminates such action without having made such determination. The
court shall, as petitioned, make an independent determination of whether
INDEMNITEE is entitled to indemnification as provided hereunder, irrespective
of any prior determination made by the Board of Directors, the stockholders or
counsel. If the Court shall determine that INDEMNITEE is entitled to
indemnification hereunder as to any claim, issue or matter involved in the
action, suit or proceeding with respect to which there has been no prior
determination pursuant hereto or with respect to which there has been a prior
determination pursuant hereto that INDEMNITEE was not entitled to
indemnification hereunder, Hadson shall pay all expenses (including attorneys'
fees) actually incurred by INDEMNITEE in connection with such judicial
determination. If the person (including the Board of Directors, independent
legal counsel, the stockholders, or a court) making the determination hereunder
shall determine that INDEMNITEE is entitled to indemnification as to some
claims, issues or matters involved in the action, suit or proceeding but not as
to others, such person shall reasonably prorate the expenses (including
attorneys'
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<PAGE> 7
fees, judgments, penalties, fines and amounts paid in settlement) with respect
to which indemnification is sought by INDEMNITEE among such claims, issues or
matters. If, and to the extent it is finally determined hereunder that
INDEMNITEE is not entitled to indemnification, then INDEMNITEE agrees to
reimburse Hadson for all expenses advanced or prepaid hereunder, or the proper
proportion thereof, other than the expenses of obtaining the judicial
determination referred to above.
7. Limitation of Actions and Release of Claims. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Hadson or any AFFILIATE of Hadson against INDEMNITEE, his spouse, heirs,
executors or administrators after the expiration of two years from the date
INDEMNITEE ceases (for any reason) to serve in any one or more of the capacities
covered by this agreement, and any claim or cause of action of Hadson or its
AFFILIATE shall be extinguished and deemed released unless asserted by filing
of a legal action within such two-year period.
8. Prepaid Expenses. The costs and expenses incurred by
INDEMNITEE in investigating, defending, or appealing any threatened, pending or
completed civil or criminal action, suit or proceedings, administrative or
investigative covered hereunder, shall be paid by Hadson in advance as may be
appropriate to properly defend any such action, suit, or proceeding, and/or paid
in advance at the request of the INDEMNITEE, and any judgments, fines or amounts
paid in settlement shall be paid by Hadson in advance, with the understanding
and agreement hereby made and entered into by INDEMNITEE and Hadson, that in
the event it shall ultimately be determined as provided hereunder that
INDEMNITEE was not entitled to be indemnified, or was not entitled to be fully
indemnified, that INDEMNITEE shall repay to Hadson such amount, or the
appropriate portion thereof, so paid or advance.
9. Other Rights and Remedies. The indemnification and advance
payment of expenses as provided by any provision of this agreement shall not be
deemed exclusive of any other rights to which INDEMNITEE may be entitled under
any provision of law, the Certificate of Incorporation, any By-Law, this or
other agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while occupying any of the positions of having any of the
relationships referred to in Section 2 of this agreement, and shall continue
after INDEMNITEE has ceased to occupy such position or have such relationship
and shall inure to the benefit of the heirs, executors and administrators of
INDEMNITEE.
10. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable
7
<PAGE> 8
for any reason whatsoever (i) the validity, legality and enforceability of the
remaining provisions of this Agreement (including without limitation, all
portions of any paragraphs of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby,
and (ii) to the fullest extent possible, the provisions of this agreement
(including, without limitation, all portions of any paragraph of this Agreement
containing any such provision held to be invalid, illegal or unenforceable,
that are not themselves invalid, illegal or unenforceable) shall be construed
so as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
11. Prior Agreements. This agreement shall be of no force and
effect with regard to the cost of settlement borne or paid by INDEMNITEE under
the provisions of any agreement executed by Hadson and/or INDEMNITEE prior to
the date hereof.
12. Identical Counterparts.This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
13. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
14. Use of Certain Terms. As used in this Agreement, the words
"herein", "hereof", and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision.
15. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
16. Notice to Hadson by INDEMNITEE. INDEMNITEE agrees to promptly
notify Hadson in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
17. Notices. All notices, requests, demand and other
communications hereunder shall be in writing and shall be deemed have been duly
given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication
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<PAGE> 9
shall have been directed or if (ii) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed:
(a) If to INDEMNITEE, at the address indicated on the
signature page hereof.
(b) If to Hadson Corporation, to
P.O. Box 26770
Oklahoma City, Oklahoma 73126
or to such address as may have been furnished to INDEMNITEE by Hadson.
18. Governing Law. The Parties hereto agree that this agreement
shall be construed and enforced in accordance with and governed by, the Laws of
the State of Delaware.
19. Successors and Assigns. This Agreement shall be binding upon
Hadson and its successors and assigns and shall inure to the benefit of
INDEMNITEE and his spouse, heirs, executors and administrators.
ENTERED into on the day and year first above written.
ATTEST: HADSON CORPORATION
BY: /s/ J. MICHAEL ADCOCK BY: /s/ STEPHEN HOUGHTON
SECRETARY
INDEMNITEE
/s/ ROBERT P. CAPPS
ROBERT P. CAPPS
ADDRESS: Post Office Box 26770
Oklahoma City, Oklahoma 73126
9
<PAGE> 1
Exhibit 10.22
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 20th
day of December, 1994, by and between Hadson Corporation, a Delaware
corporation (the "Company"), and Kathleen M. Eisbrenner (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity. The Indemnitee is
willing, subject to certain conditions including without limitation the
execution and performance of this Agreement by the Company and the Company's
agreement to provide the Indemnitee at all times the broadest and most
favorable (to Indemnitee) possible indemnification permitted by applicable law
(whether by legislative action or judicial decision), to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company may,
however, decide not to obtain such insurance, and there can be no assurance as
to whether the Company will obtain such insurance or as to the continuation or
renewal thereof, or that any such insurance will provide coverage for losses to
which the Indemnitee may be exposed and for which he or she may be permitted to
be indemnified under the General Corporation Law of the State of Delaware (the
"DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in to
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities, the Company and Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than
<PAGE> 2
a Proceeding by or in the right of the Company), by reason of the fact that he
or she is or was or had agreed to become a director, officer, employee or agent
of the Company, or is or was serving or had agreed to serve at the request of
the Company as a director, officer, partner, member, trustee, employee or agent
(each an "Authorized Capacity") of another corporation, partnership, joint
venture, trust or other enterprise (each "Another Entity"), or by reason of any
action alleged to have been taken or omitted in such capacity, against any and
all costs, charges and expenses (including attorneys' and others' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such Proceeding if the Indemnitee
acted in good faith and in a manner that he or she reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, the Indemnitee had no reasonable cause to believe his or
her conduct was unlawful. The termination of any Proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent will not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not meet the
foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth
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<PAGE> 3
in Section 2(a) and Section 2(b) (the "Indemnification Standards"). Such
determination will be made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs, expenses, expenses of
investigation, preparation, defense and settlement of Proceedings, and expenses
of appeal, attachment or similar bonds; provided, however, that the Company
will not be obligated under this Section 3(a) to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from
transactions in securities which were effected in violation of
Section 10(b) or Section 14(e) of the Exchange Act, including
Rule 10b-5 or Rule 14e-3 promulgated thereunder.
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<PAGE> 4
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law firm (x) that neither at the time
in question nor in the five years immediately preceding such time has been
retained to represent (A) the Company (or any of its affiliates) or the
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<PAGE> 5
Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding or claim giving rise to a claim for indemnification under
this Agreement, (y) that, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would not be
precluded from representing either the Company or the Indemnitee in an action
to determine the Indemnitee's rights under this Agreement and (z) to which the
Indemnitee or the Company, acting therein through a majority of the
Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company shall
select another independent legal counsel subject to similar reasonable
objection until independent legal counsel is agreed upon. The Company will pay
the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding and
(ii), if and to the extent required by law at the time of such
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<PAGE> 6
advance, he or she undertakes to repay such amounts advanced as to which it may
ultimately be determined that the Indemnitee is not entitled. In order to
obtain advancement of expenses pursuant to Section 3(b), the Indemnitee may
submit an Undertaking or, if the Indemnitee chooses not to submit an
Undertaking, shall submit such other form of request as he or she determines to
be appropriate (an "Expense Request"). Upon receipt of an Undertaking or
Expense Request, as the case may be, the Company will within 5 calendar days
make payment of the costs, charges and expenses stated in the Undertaking or
Expense Request. No security will be required in connection with any
Undertaking or Expense Request and any Undertaking or Expense Request will be
accepted, and all such payments shall be made, without reference to the
Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine the Indemnitee's entitlement to
indemnification) to have made
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<PAGE> 7
a determination prior to commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL nor an actual
determination by the Company (including any person or persons empowered under
Section 4(b) to determine the Indemnitee's entitlement to indemnification) that
the Indemnitee has not met such applicable standard of conduct will be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined
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<PAGE> 8
below) of the Company, (a) the Company will require (if it is not the
surviving, resulting or acquiring corporation therein) the surviving, resulting
or acquiring corporation expressly to assume the Company's obligations under
this Agreement and to agree to indemnify the Indemnitee to the full extent
provided herein and (b), whether or not the Company is the resulting, surviving
or acquiring corporation in any such transaction (or change of control of the
Company), the Indemnitee will also stand in the same position under this
Agreement with respect to the resulting, surviving or acquiring corporation as
he or she would have with respect to the Company if the transaction (or change
of control of the Company) had not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and advancement of expenses under this Agreement or any other agreement or
Charter or By-law provision now or hereafter in effect, the Company shall seek
legal advice only from independent legal counsel selected as provided in
Section 4(b). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of such independent legal counsel and
to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the costs, charges, expenses, judgments, fines and amounts paid in
settlement of a Proceeding but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement
-8-
<PAGE> 9
of expenses than that provided under this Agreement as of the date hereof, the
Indemnitee will automatically, without the necessity of any further action by
the Company or the Indemnitee, be deemed to have such greater right pursuant to
this Agreement. Similarly, the Indemnitee shall have the benefit of any future
changes to the By-Laws or the Certificate (as defined below) which grant or
permit any greater right to indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate of
Incorporation of the Company (the "Certificate"), By-Laws, the DGCL or any
other applicable law as applied to any act or failure to act occurring in whole
or in part prior to the date upon which any such amendment was approved by the
Board or the stockholders, as the case may be. Notwithstanding the foregoing,
if the Company adopts any amendment to the Certificate or By-Laws the effect of
which is to so deny, diminish or encumber the Indemnitee's rights to such
indemnity, such amendment will apply only to acts or failures to act occurring
entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the By-Laws, the DGCL, any
policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Charter or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
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<PAGE> 10
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will include any excise
taxes assessed on the Indemnitee with respect to any employee benefit plan; and
references to "serving at the request of the Company" will include any service
in any capacity which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries; references to Sections or Exhibits are to Sections or Exhibits
of or to this Agreement; references to the singular will include the plural and
vice versa; and if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he or she will be deemed to have acted in a "manner
not opposed to the best interests of the Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than Santa Fe Energy Resources, Inc., together with its
affiliates, The Prudential Insurance Company of America, together with its
affiliates, or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing [20%] or more of the
total voting power represented by the Company's then outstanding Voting
Securities, (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the
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<PAGE> 11
Company pursuant to this Agreement and (b) any other director or officer of the
Company or person serving at the request of the Company in an Authorized
Capacity of or for Another Entity may also be subject to liability arising out
of such Proceeding or claim and in connection with such Proceeding or claim
seeks indemnification against the Company pursuant to an agreement similar to
this Agreement, the Indemnitee, together with such other persons, will employ
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ Greg G. Jenkins
Name: Greg G. Jenkins
Title: President and
Chief Executive Officer
INDEMNITEE
/s/ Kathleen M. Eisbrenner
Name: Kathleen M. Eisbrenner
Vice President
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 20, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of ____________________________________________________________________________
______________________________________________________________________________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
____________________________
Name:_______________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 20, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
______________________________________________________________________________.
____________________________
Name:_______________________
<PAGE> 1
Exhibit 10.23
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 20th
day of December, 1994, by and between Hadson Corporation, a Delaware
corporation (the "Company"), and Thomas W. Pounds (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity. The Indemnitee is
willing, subject to certain conditions including without limitation the
execution and performance of this Agreement by the Company and the Company's
agreement to provide the Indemnitee at all times the broadest and most
favorable (to Indemnitee) possible indemnification permitted by applicable law
(whether by legislative action or judicial decision), to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company may,
however, decide not to obtain such insurance, and there can be no assurance as
to whether the Company will obtain such insurance or as to the continuation or
renewal thereof, or that any such insurance will provide coverage for losses to
which the Indemnitee may be exposed and for which he or she may be permitted to
be indemnified under the General Corporation Law of the State of Delaware (the
"DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in to
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities, the Company and Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than
<PAGE> 2
a Proceeding by or in the right of the Company), by reason of the fact that he
or she is or was or had agreed to become a director, officer, employee or agent
of the Company, or is or was serving or had agreed to serve at the request of
the Company as a director, officer, partner, member, trustee, employee or agent
(each an "Authorized Capacity") of another corporation, partnership, joint
venture, trust or other enterprise (each "Another Entity"), or by reason of any
action alleged to have been taken or omitted in such capacity, against any and
all costs, charges and expenses (including attorneys' and others' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such Proceeding if the Indemnitee
acted in good faith and in a manner that he or she reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, the Indemnitee had no reasonable cause to believe his or
her conduct was unlawful. The termination of any Proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent will not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not meet the
foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth
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<PAGE> 3
in Section 2(a) and Section 2(b) (the "Indemnification Standards"). Such
determination will be made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs, expenses, expenses of
investigation, preparation, defense and settlement of Proceedings, and expenses
of appeal, attachment or similar bonds; provided, however, that the Company
will not be obligated under this Section 3(a) to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from
transactions in securities which were effected in violation of
Section 10(b) or Section 14(e) of the Exchange Act, including
Rule 10b-5 or Rule 14e-3 promulgated thereunder.
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<PAGE> 4
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law firm (x) that neither at the time
in question nor in the five years immediately preceding such time has been
retained to represent (A) the Company (or any of its affiliates) or the
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<PAGE> 5
Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding or claim giving rise to a claim for indemnification under
this Agreement, (y) that, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would not be
precluded from representing either the Company or the Indemnitee in an action
to determine the Indemnitee's rights under this Agreement and (z) to which the
Indemnitee or the Company, acting therein through a majority of the
Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company shall
select another independent legal counsel subject to similar reasonable
objection until independent legal counsel is agreed upon. The Company will pay
the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding and
(ii), if and to the extent required by law at the time of such
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<PAGE> 6
advance, he or she undertakes to repay such amounts advanced as to which it may
ultimately be determined that the Indemnitee is not entitled. In order to
obtain advancement of expenses pursuant to Section 3(b), the Indemnitee may
submit an Undertaking or, if the Indemnitee chooses not to submit an
Undertaking, shall submit such other form of request as he or she determines to
be appropriate (an "Expense Request"). Upon receipt of an Undertaking or
Expense Request, as the case may be, the Company will within 5 calendar days
make payment of the costs, charges and expenses stated in the Undertaking or
Expense Request. No security will be required in connection with any
Undertaking or Expense Request and any Undertaking or Expense Request will be
accepted, and all such payments shall be made, without reference to the
Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine the Indemnitee's entitlement to
indemnification) to have made
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<PAGE> 7
a determination prior to commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL nor an actual
determination by the Company (including any person or persons empowered under
Section 4(b) to determine the Indemnitee's entitlement to indemnification) that
the Indemnitee has not met such applicable standard of conduct will be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined
-7-
<PAGE> 8
below) of the Company, (a) the Company will require (if it is not the
surviving, resulting or acquiring corporation therein) the surviving, resulting
or acquiring corporation expressly to assume the Company's obligations under
this Agreement and to agree to indemnify the Indemnitee to the full extent
provided herein and (b), whether or not the Company is the resulting, surviving
or acquiring corporation in any such transaction (or change of control of the
Company), the Indemnitee will also stand in the same position under this
Agreement with respect to the resulting, surviving or acquiring corporation as
he or she would have with respect to the Company if the transaction (or change
of control of the Company) had not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and advancement of expenses under this Agreement or any other agreement or
Charter or By-law provision now or hereafter in effect, the Company shall seek
legal advice only from independent legal counsel selected as provided in
Section 4(b). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of such independent legal counsel and
to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the costs, charges, expenses, judgments, fines and amounts paid in
settlement of a Proceeding but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement
-8-
<PAGE> 9
of expenses than that provided under this Agreement as of the date hereof, the
Indemnitee will automatically, without the necessity of any further action by
the Company or the Indemnitee, be deemed to have such greater right pursuant to
this Agreement. Similarly, the Indemnitee shall have the benefit of any future
changes to the By-Laws or the Certificate (as defined below) which grant or
permit any greater right to indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate of
Incorporation of the Company (the "Certificate"), By-Laws, the DGCL or any
other applicable law as applied to any act or failure to act occurring in whole
or in part prior to the date upon which any such amendment was approved by the
Board or the stockholders, as the case may be. Notwithstanding the foregoing,
if the Company adopts any amendment to the Certificate or By-Laws the effect of
which is to so deny, diminish or encumber the Indemnitee's rights to such
indemnity, such amendment will apply only to acts or failures to act occurring
entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the By-Laws, the DGCL, any
policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Charter or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
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<PAGE> 10
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will include any excise
taxes assessed on the Indemnitee with respect to any employee benefit plan; and
references to "serving at the request of the Company" will include any service
in any capacity which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries; references to Sections or Exhibits are to Sections or Exhibits
of or to this Agreement; references to the singular will include the plural and
vice versa; and if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he or she will be deemed to have acted in a "manner
not opposed to the best interests of the Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than Santa Fe Energy Resources, Inc., together with its
affiliates, The Prudential Insurance Company of America, together with its
affiliates, or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing [20%] or more of the
total voting power represented by the Company's then outstanding Voting
Securities, (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the
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<PAGE> 11
Company pursuant to this Agreement and (b) any other director or officer of the
Company or person serving at the request of the Company in an Authorized
Capacity of or for Another Entity may also be subject to liability arising out
of such Proceeding or claim and in connection with such Proceeding or claim
seeks indemnification against the Company pursuant to an agreement similar to
this Agreement, the Indemnitee, together with such other persons, will employ
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ GREG G. JENKINS
Name: Greg G. Jenkins
Title: President and
Chief Executive Officer
INDEMNITEE
/s/ THOMAS W. POUNDS
Name: Thomas W. Pounds
Vice President, Legal
Affairs and General
Counsel
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 20, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of _____________________________________________________________________________
________________________________________________________________________________
_____________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
________________________________________
Name:___________________________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 20, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
_______________________________________________________________________________
________________________.
________________________________________
Name:___________________________________
<PAGE> 1
Exhibit 10.24
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 20th
day of December, 1994, by and between Hadson Corporation, a Delaware
corporation (the "Company"), and Richard N. Coffman (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity. The Indemnitee is
willing, subject to certain conditions including without limitation the
execution and performance of this Agreement by the Company and the Company's
agreement to provide the Indemnitee at all times the broadest and most
favorable (to Indemnitee) possible indemnification permitted by applicable law
(whether by legislative action or judicial decision), to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company may,
however, decide not to obtain such insurance, and there can be no assurance as
to whether the Company will obtain such insurance or as to the continuation or
renewal thereof, or that any such insurance will provide coverage for losses to
which the Indemnitee may be exposed and for which he or she may be permitted to
be indemnified under the General Corporation Law of the State of Delaware (the
"DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in to
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities, the Company and Indemnitee agree as follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than
<PAGE> 2
a Proceeding by or in the right of the Company), by reason of the fact that he
or she is or was or had agreed to become a director, officer, employee or agent
of the Company, or is or was serving or had agreed to serve at the request of
the Company as a director, officer, partner, member, trustee, employee or agent
(each an "Authorized Capacity") of another corporation, partnership, joint
venture, trust or other enterprise (each "Another Entity"), or by reason of any
action alleged to have been taken or omitted in such capacity, against any and
all costs, charges and expenses (including attorneys' and others' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such Proceeding if the Indemnitee
acted in good faith and in a manner that he or she reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, the Indemnitee had no reasonable cause to believe his or
her conduct was unlawful. The termination of any Proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent will not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not meet the
foregoing standard of conduct to the extent applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without limitation
attorneys' and others' fees, actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth
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<PAGE> 3
in Section 2(a) and Section 2(b) (the "Indemnification Standards"). Such
determination will be made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs, expenses, expenses of
investigation, preparation, defense and settlement of Proceedings, and expenses
of appeal, attachment or similar bonds; provided, however, that the Company
will not be obligated under this Section 3(a) to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from
transactions in securities which were effected in violation of
Section 10(b) or Section 14(e) of the Exchange Act, including
Rule 10b-5 or Rule 14e-3 promulgated thereunder.
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<PAGE> 4
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of a quorum consisting of directors who are not and were not parties to
such Proceeding or claim ("Disinterested Directors"), (ii) by written opinion
of independent legal counsel selected by a majority of the Disinterested
Directors (or, if there are no Disinterested Directors or a majority vote
thereof is not obtainable, by a majority of the entire Board), if a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law firm (x) that neither at the time
in question nor in the five years immediately preceding such time has been
retained to represent (A) the Company (or any of its affiliates) or the
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<PAGE> 5
Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding or claim giving rise to a claim for indemnification under
this Agreement, (y) that, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would not be
precluded from representing either the Company or the Indemnitee in an action
to determine the Indemnitee's rights under this Agreement and (z) to which the
Indemnitee or the Company, acting therein through a majority of the
Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company shall
select another independent legal counsel subject to similar reasonable
objection until independent legal counsel is agreed upon. The Company will pay
the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination, (ii) be sworn to
by all persons who participated in the determination and voted to deny
indemnification and (iii) if such determination was made by independent legal
counsel, include a copy of the related written opinion of such counsel. The
provisions of this Section 4(c) are intended to be procedural only and will not
affect the right of the Indemnitee to indemnification under this Agreement and
any determination that the Indemnitee is not entitled to indemnification and
any failure to make the payments requested in the Indemnification Statement
will be subject to review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding and
(ii), if and to the extent required by law at the time of such
-5-
<PAGE> 6
advance, he or she undertakes to repay such amounts advanced as to which it may
ultimately be determined that the Indemnitee is not entitled. In order to
obtain advancement of expenses pursuant to Section 3(b), the Indemnitee may
submit an Undertaking or, if the Indemnitee chooses not to submit an
Undertaking, shall submit such other form of request as he or she determines to
be appropriate (an "Expense Request"). Upon receipt of an Undertaking or
Expense Request, as the case may be, the Company will within 5 calendar days
make payment of the costs, charges and expenses stated in the Undertaking or
Expense Request. No security will be required in connection with any
Undertaking or Expense Request and any Undertaking or Expense Request will be
accepted, and all such payments shall be made, without reference to the
Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine the Indemnitee's entitlement to
indemnification) to have made
-6-
<PAGE> 7
a determination prior to commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL nor an actual
determination by the Company (including any person or persons empowered under
Section 4(b) to determine the Indemnitee's entitlement to indemnification) that
the Indemnitee has not met such applicable standard of conduct will be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined
-7-
<PAGE> 8
below) of the Company, (a) the Company will require (if it is not the
surviving, resulting or acquiring corporation therein) the surviving, resulting
or acquiring corporation expressly to assume the Company's obligations under
this Agreement and to agree to indemnify the Indemnitee to the full extent
provided herein and (b), whether or not the Company is the resulting, surviving
or acquiring corporation in any such transaction (or change of control of the
Company), the Indemnitee will also stand in the same position under this
Agreement with respect to the resulting, surviving or acquiring corporation as
he or she would have with respect to the Company if the transaction (or change
of control of the Company) had not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and advancement of expenses under this Agreement or any other agreement or
Charter or By-law provision now or hereafter in effect, the Company shall seek
legal advice only from independent legal counsel selected as provided in
Section 4(b). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of such independent legal counsel and
to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the costs, charges, expenses, judgments, fines and amounts paid in
settlement of a Proceeding but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
By-Laws, the DGCL, any other statute, insurance policy, agreement, vote of
stockholders or of directors or otherwise, both as to actions in his or her
official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, to the extent the Indemnitee otherwise
would have any greater right to indemnification or advancement of expenses
under any provision of the By-Laws as in effect on the date hereof, the
Indemnitee will be deemed to have such greater right pursuant to this
Agreement; and, provided further, that, inasmuch as it is the intention of the
Company to provide the Indemnitee with the broadest and most favorable (to the
Indemnitee) possible indemnity permitted by applicable law (whether by
legislative action or judicial decision), to the extent that the DGCL currently
permits or in the future permits (whether by legislative action or judicial
decision) any greater right to indemnification or advancement
-8-
<PAGE> 9
of expenses than that provided under this Agreement as of the date hereof, the
Indemnitee will automatically, without the necessity of any further action by
the Company or the Indemnitee, be deemed to have such greater right pursuant to
this Agreement. Similarly, the Indemnitee shall have the benefit of any future
changes to the By-Laws or the Certificate (as defined below) which grant or
permit any greater right to indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate of
Incorporation of the Company (the "Certificate"), By-Laws, the DGCL or any
other applicable law as applied to any act or failure to act occurring in whole
or in part prior to the date upon which any such amendment was approved by the
Board or the stockholders, as the case may be. Notwithstanding the foregoing,
if the Company adopts any amendment to the Certificate or By-Laws the effect of
which is to so deny, diminish or encumber the Indemnitee's rights to such
indemnity, such amendment will apply only to acts or failures to act occurring
entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the By-Laws, the DGCL, any
policy of insurance or otherwise.
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Charter or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
-9-
<PAGE> 10
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will include any excise
taxes assessed on the Indemnitee with respect to any employee benefit plan; and
references to "serving at the request of the Company" will include any service
in any capacity which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries; references to Sections or Exhibits are to Sections or Exhibits
of or to this Agreement; references to the singular will include the plural and
vice versa; and if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he or she will be deemed to have acted in a "manner
not opposed to the best interests of the Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than Santa Fe Energy Resources, Inc., together with its
affiliates, The Prudential Insurance Company of America, together with its
affiliates, or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing [20%] or more of the
total voting power represented by the Company's then outstanding Voting
Securities, (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all or substantially all the Company's assets.
(c) For purposes of this Agreement, the term "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the
-10-
<PAGE> 11
Company pursuant to this Agreement and (b) any other director or officer of the
Company or person serving at the request of the Company in an Authorized
Capacity of or for Another Entity may also be subject to liability arising out
of such Proceeding or claim and in connection with such Proceeding or claim
seeks indemnification against the Company pursuant to an agreement similar to
this Agreement, the Indemnitee, together with such other persons, will employ
counsel to represent jointly the Indemnitee and such other persons unless the
Indemnitee determines that such joint representation would be precluded under
the applicable standards of professional conduct then prevailing under the law
of the State of Delaware, in which case the Indemnitee will notify the Company
(to the attention of the Secretary) thereof and will be entitled to be
represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HADSON CORPORATION
By: /s/ GREG G. JENKINS
Name: Greg G. Jenkins
Title: President and
Chief Executive Officer
INDEMNITEE
/s/ RICHARD N. COFFMAN
Name: Richard N. Coffman
Controller
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<PAGE> 13
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of December 20, 1994 (the "Indemnification
Agreement"), between Hadson Corporation, a Delaware corporation (the Company"),
and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of _____________________________________________________________________________
________________________________________________________________________________
_____________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
________________________________________
Name:___________________________________
<PAGE> 14
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of December 20, 1994 (the "Indemnification Agreement"),
between Hadson Corporation, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
_______________________________________________________________________________
________________________.
________________________________________
Name:___________________________________
<PAGE> 1
EXHIBIT 10.36
HADSON CORPORATION
HADSON GAS SYSTEMS, INC.
UNITED LP GAS CORPORATION AND
WESTERN NATURAL GAS & TRANSMISSION CORP.
FIRST AMENDMENT TO CREDIT AGREEMENT
To Bank of Montreal, individually
and as Agent and the other Banks
party to the December 14, 1993
Credit Agreement with the undersigned
Gentlemen:
The undersigned, Hadson Corporation, a Delaware corporation (the
"Company") Hadson Gas Systems, Inc., an Oklahoma corporation ("Gas
Systems"), United LP Gas Corporation, an Oklahoma corporation ("United") and
Western Natural Gas & Transmission Corp., a Colorado corporation ("Western")
refer to the Credit Agreement dated as of December 14, 1993 as currently in
effect between us (the "Credit Agreement"), capitalized terms used without
definition below to have the meanings ascribed to them in the Credit
Agreement. The Obligors execute and deliver this Agreement for this
purpose, inter alia, of amending the Credit Agreement in certain respects
and for the other uses and purposes hereinafter set forth.
I. The Credit Agreement.
Upon satisfaction of the conditions precedent to effectiveness set
forth below, the Credit Agreement shall be amended as follows:
(A) Section 1.1. (General Terms Applicable to the Revolving
Credit). Section 1.1 of the Credit Agreement shall be amended by striking
the third sentence thereof and substituting the following therefor:
"The maximum amount of the Revolving Credit which each Bank
agrees to extend hereunder shall, subject to Sections 2.8,
10.12 and 10.18 hereof, be as set forth below:
<TABLE>
<CAPTION>
Amount
Banks of Commitment:
<S> <C>
Bank of Montreal $25,000,000
The First National Bank of Chicago $12,500,000
The First National Bank of Boston $12,500,000
The Fuji Bank Limited, Houston Agency $12,500,000
Union Bank $12,500,000
</TABLE>
(B) Section 1.2. (The Loans). Section 1.2 of the Credit
Agreement shall be amended by striking the figure "$10,000,000" appearing
in the first sentence thereof and substituting the figure "$15,000,000"
therefor and and by adding the following proviso at the end of such sentence:
"provided, however, that the maximum amount of the Revolving
Credit which may be availed of by the Company in the form of
Loans shall automatically and
<PAGE> 2
permanently reduce to $10,000,000 on the later of May 15,
1995 or the date which is 15 days prior to the last day of
the last month in which Santa Fe has agreed to defer
$5,000,000 of payments due from Gas Systems on and subject to
the terms and conditions set forth in the Santa Fe Letter
Agreement (as hereinafter defined) pursuant to an amendment
to the Santa Fe Letter Agreement satisfactory to the Agent in
the form and substance."
(C) Section 2.7. (Mandatory Prepayments). Section 2.7 of the
Credit Agreement shall be amended by adding the phrase "or the Commitments
as then in effect, whichever is less" immediately following the phrase "as
then determined and computed" in the first sentence thereof. Section 2.7 of
the Credit Agreement shall be further amended by adding the following
sentence at the end thereof:
"In the event that the outstanding principal amount of the
Notes shall at any time exceed the maximum amount of the
Revolving Credit which may then be availed of by the Company
in the form of Loans pursuant to Section 1.2 hereof, the
Company shall pay over the amount of the excess to the Agent
immediately as and for a mandatory prepayment on the Notes."
(D) Section 2.8 (Terminations). Section 2.8 of the Credit
Agreement shall be amended by adding the following sentence at the end
thereof:
"In the event that the maximum amount of the Revolving Credit
which may be availed of by the Company in the form of Loans is
reduced pursuant to Section 1.2 hereof from $15,000,000 to
$10,000,000 then in that event, effective with such
reduction, the Commitments shall be automatically and
permanently reduced by $5,000,000, with such reduction being
applied ratably as among the Commitments of the Banks."
(E) Section 6.9. (Acquisitions, Investments, Loans and Advances).
Section 6.9 of the Credit Agreement shall be amended by striking the word
"and" at the end of subsection (j) thereof, by striking the period at the
end of subsection (k) thereof and substituting a semicolon therefor, by
adding the word "and" immediately following such semicolon and by adding
the following additional subpart (l) thereto:
" (l) the notes and preferred stock of the
Purchaser (as hereinafter defined) to be received by the
Company as part of its sale of the capital stock of United
pursuant to the Approved Stock Purchase Agreement."
(F) Section 6.10 (Indebtedness). Section 6.10 of the Credit
Agreement shall be amended by striking the word "and" appearing at the end
of subsection (h) thereof, by striking the period at the end of subpart
(i) thereof and substituting a semicolon therefor and adding the word
"and" immediately after that semicolon and by adding the following new
subsection (j) thereto:
" (j) Subordinated Indebtedness provided,
however, that the Subordinated Indebtedness shall not be
incurred for any purpose other than satisfying the liabilities
of the Company and/or its Subsidiaries to Santa Fe, West
Texas Transmission Corp. or Brent Jordan arising in
connection with a suit filed in December 1990 in Harris
County, Texas by West Texas Transmission Corp. and Brent
Jordan against certain Subsidiaries and prior to the
issuance of such Subordinated Indebtedness the Company
shall provide the Agent with such evidence as it may
reasonably require establishing that upon the issuance of
the Subordinated Indebtedness the Company and its
Subsidiaries shall have no further liability with respect to
the foregoing matters."
-2-
<PAGE> 3
(G) Section 6.13 (Clean-Down and Clean-Up). Section 6.13 of the
Credit Agreement is amended by adding the following sentence at the end
thereof:
"It is further agreed that, anything contained elsewhere in
this Agreement to the contrary notwithstanding, the Company
will for not less than five consecutive Business Days
during each month cause the aggregate unpaid principal
balance of the Notes not to exceed $10,000,000."
(H) Section 6.16. (Mergers, Consolidations and Sales). Section
6.16 of the Credit Agreement shall be amended by adding the following
additional provisions thereto:
"The foregoing provisions of this Section 6.16 to the
contrary notwithstanding, the Company may sell all of the
capital stock of United to United Acquistion Corp. (the
"Purchaser") pursuant to the Approved Stock Purchase
Agreement on and subject to the following additional terms
and conditions: (i) no Default or Event of Default shall
have occurred and be continuing either immediately before or
immediately after confirmation of such sale and the Agent
shall have received a certificate of a responsible officer
of the Company to the foregoing effect, (ii) such sale shall
be consummated on or before January 31, 1995 or such later
date as may be approved by the Required Banks; (iii) all
obligations of United and its subsidiaries to the Company or
any other Subsidiary of the Company shall have been paid and
satisfied in full except for ordinary short-term trade
payables and accruals which shall be discharged in the
ordinary course of business and except that intercompany
amounts due from the Company to United and from United to
the Company may be cancelled and discharged as contemplated
by Section 1.04(f) of the Approved Stock Purchase Agreement
and the Agent shall have received a certificate of a
responsible officer of the Company to the foregoing effect;
(iv) the sale shall be consummated substantially in accord
with the requirements of the Approved Stock Purchase Agreement
subject to such exceptions, waivers and amendments as may be
approved by the Agent (or the Required Banks to the extent
required by the definition of the term "Approved Stock
Purchase Agreement") and the Agent shall have received a
certificate of a responsible officer of the Company to
the foregoing effect; (v) the promissory note and Series A
Redeemable Preferred Stock of the Purchaser which is to be
received pursuant to the Approved Stock Purchase Agreement
shall be in the forms prescribed by the Approved Stock
Purchase Agreement or such other forms as may be approved by
the Agent and shall be delivered and pledged to the
Collateral Agent (and shall constitute part of the Collateral
as shall all rights of the Company to payments under the
Approved Stock Purchase Agreement) first to secure the
obligations of the Company to the Banks and the Agent under
the Loan Documents and second to secure the Prudential
Indebtedness all pursuant to documentation reasonably
satisfactory to the Agent in form and substance, (vi) all
Letters of Credit issued for the account of United shall have
been cancelled or terminated or Bank of Montreal shall in
its discretion have assumed liability for such letters of
credit in a manner acceptable to the Banks (with the Banks
to no longer participate in the credit risk incident to such
letters of credit and with the liability in respect of such
letters of credit to no longer be secured with the
Collateral), (vii) such amendments shall have been made to
the Collateral Agency Agreement and any Collateral Documents
running in favor of the Collateral Agent as the Agent may
deem necessary or appropriate to provide for the deposit and
pledge with the Collateral Agent of the note and redeemable
-3-
<PAGE> 4
preferred stock of the Purchaser to be received by the
Company pursuant to the Approved Stock Purchase Agreement
and to provide for a perfected lien thereon, (viii) the
Prudential Entities shall have approved the sale of the
capital stock of United, any conditions to such approval
shall have been satisfied and the Prudential Entities shall
have acknowledged that the consideration received and to be
received in connection with such sale shall not trigger a
requirement for prepayment of the Prudential Indebtedness
or for any of such proceeds to be held segregated for or
used to acquire other assets (it being acknowledged that
the amount of consideration to be received in respect of
such sale may nonetheless count against or reduce the amount
of proceeds which the Company is not required to so use or
apply out of subsequent asset sales pursuant to the terms
of the New Securities Purchase Agreement); and (ix) the
Company shall have demonstrated to the reasonable
satisfaction of the Agent (including through the use of
reasonable estimates of receivables if the precise amount of
same is not practically ascertainable) that immediately after
giving effect to such sale (including without limitation the
effect of the exclusion of the accounts receivable of United
from the Borrowing Base, the exclusion of the letters of
credit issued for the account of United from the letters of
credit and the application of any proceeds from the sale to
the retirement of indebtedness outstanding under the Credit
Agreement) the available and unused amount of the
Commitments will not be less than it was immediately prior to
giving effect to the consummation of such sale.
It is understood that absent the occurrence of a
Default or Event of Default, the Company shall be entitled to
receive and utilize in the ordinary course of its business,
and subject to the other terms and conditions of the Credit
Agreement as amended hereby, the cash payments made and
to be made under the Approved Stock Purchase Agreement and
all payments of principal, interest and dividends on the
notes and redeemable preferred stock of the Purchaser to be
received by the Company pursuant to the Approved Stock
Purchase Agreement.
Upon consummation of the sale of the capital stock
of United pursuant to the foregoing (i) United shall cease
to be an Obligor, a Subsidiary and a Restricted Subsidiary for
purposes of the Credit Agreement and the Banks hereby
authorize the Agent to take such actions as it shall deem
necessary or appropriate in order to release United from
and against any liability to the Banks under the Loan
Documents and to release, or cause the Collateral Agent to
release, any liens on the assets of United granted pursuant
to the Loan Documents and (ii) those letters of credit for
which United is the applicant shall cease to be "Letters of
Credit" and the applications therefor shall cease to be
"Applications" for all purposes of the Credit Agreement and
the other Loan Documents. It is acknowledged and agreed
that if Bank of Montreal elects to assume full liability for
the letters of credit issued on behalf of United, it may
require that the Company continue to be liable to it in
respect of such letters of credit (but such liability shall
no longer be secured with the Collateral) and Bank of
Montreal may retain any amounts paid to it in respect of
such letters of credit solely for its own account,
including any amounts paid under any letters of credit
backing up its credit exposure in respect of such letters
of credit. The Agent is further authorized on behalf of the
Banks to take such action as shall be necessary to cause the
Collateral Agent to release its lien on the capital stock of
-4-
<PAGE> 5
United to the extent necessary to effectuate a sale of such
capital stock consummated in accord with the above and
foregoing requirements."
(I) Section 6. Additional Covenants. Section 6 of the Credit
Agreement is further amended by adding the following additional provisions
thereto:
"Section 6.21. No Modification to Santa Fe Letter
Agreement. Gas Systems will not amend, modify, waive any of
its rights under, or terminate, that certain letter agreement
dated as of December 15, 1994 by and between Santa Fe Energy
Operating Partners, L.P. and Gas Systems in the form
heretofore delivered to the Banks (the "Santa Fe Letter
Agreement"), the Company hereby representing that as of
the date the conditions precedent to effectiveness of
this First Amendment to Credit Agreement are satisfied, the
Santa Fe Letter Agreement will be in full force and effect
without amendment, modification or waiver.
Section 6.22. No Prepayment of Subordinated
Indebtedness. The Company will not prepay, acquire or
retire or amend, modify or make any payment contrary to the
terms of the promissory note of the Company referred to in the
definition of the term "Subordinated Indebtedness"."
(J) Section 7.1(b). (Certain Events of Default) Section 7.1(b)
of the Credit Agreement shall be amended by adding the phrase "or Section 6.21
or 6.22 hereof" immediately following the phrase "or 6.20 hereof".
(K) Section 8. (Definitions). Section 8 of the Credit Agreement
shall be amended by adding the following additional definitions thereto:
" The term "Approved Stock Purchase Agreement" shall
mean the Stock Purchase Agreement between the Company, United
and United Acquisition Corp. in the form of the stock
purchase agreement dated December 21, 1994 between such
companies heretofore delivered to the Banks with such
amendments and modifications thereto as may be approved by
the Required Banks or, in the case of amendments and
modifications which do not materially effect the
calculation of the purchase price for the capital stock to
be purchased thereunder or the time or mode of payment
therefor, by the Agent.
The term "Subordinated Indebtedness" shall mean
the indebtedness evidenced by that certain Subordinated Note
of the Company in the principal sum of $2,350,000 and
maturing on November 18, 2004 in the form (with
appropriate insertions) of the draft of such Subordinated
Note dated November 18, 1994 and heretofore delivered to the
Banks or in such other form as shall be approved by the
Required Banks.
The term "United Sale Date" shall mean the date on which
the sale of the capital stock of United to United
Acquisition Corp. is consummated pursuant to the Approved
Stock Purchase Agreement."
-5-
<PAGE> 6
II. Conditions Precedent to Effectiveness.
The above and foregoing amendments shall not become effective
unless and until each and all of the following conditions precedent have
been satisfied:
(A) the Agent shall have received counterparts hereof
(either as originals or at its discretion by facsimile transmission)
which, taken together, bear the signatures of the Banks and the
Obligors;
(B) the Company shall have secured the consent of the
Prudential Entities to the above and foregoing amendments as and to
the extent that such consent is required pursuant to the terms of
the New Securities Purchase Agreement or Intercreditor Agreement,
which consent shall include an acknowledgement that all references
to the Credit Agreement in the Intercreditor Agreement or Collateral
Agency Agreement are references to the Credit Agreement as so amended,
(C) the Company and the Obligors and other Pledgors
shall have executed and delivered such instruments and documents as
the Agent may reasonably require in order to assure that the liens
of the Collateral Documents continue in full force and effect and
extend and apply to the obligations of the Obligors under the Loan
Documents as increased and modified hereby,
(D) the Agent shall have received for the account of each
Bank a new promissory note of the Company in the form annexed hereto
as Exhibit A in the amount of such Bank's commitment as increased
hereby which may be availed of in the form of Loans, such promissory
notes to be deemed issued in replacement for the promissory notes
of the Company currently outstanding under the Credit Agreement and
to constitute "Notes" for all purposes of the Loan Documents,
(E) the Agent shall have received from Santa Fe a
letter satisfactory to the Agent in form and substance pursuant to
which Santa Fe acknowledges that its obligations to make certain
deferrals on and subject to the specific conditions set forth in
the Santa Fe Letter Agreement is otherwise absolute and
unconditional, undertaking to make the deferral payments within one
business day of payment to Santa Fe of any previous deferred amounts
and agreeing to deposit such deferred amounts in the Revenue Account
established pursuant to the December 14, 1993 Revenue Account
Agreement among Harris Trust and Savings Bank, Gas Systems, Santa Fe
and Santa Fe Energy Operating Partners, L.P.,
(F) the Agent shall have received for each Bank a
nonrefundable closing fee equal to the sum of (i) 1/8 of 1% of the
amount of its Commitment immediately prior to giving effect to this
Agreement and (ii) 4/10 of 1% of the amount by which its Commitment
is increased by this Agreement,
(G) the Agent shall have received for its own use and
benefit such fees as the Company has agreed to pay to it,
(H) the Agent shall have received resolutions of the
Boards of the Directors of the Obligors, in form and substance
satisfactory to the Agent, approving this amendment and all
instruments and documents executed and delivered in furtherance
thereof or in satisfaction of the conditions precedent to
effectiveness set forth above,
(I) all legal matters incident to the transactions
contemplated hereby shall be satisfactory to the Banks and their
counsel and the Banks shall have received the favorable written
opinion of acceptable counsel for the Obligors and other Pledgors in
form and substance satisfactory to the Banks and their counsel,
with respect to the power and authority of the Obligors to enter into
this
-6-
<PAGE> 7
Agreement, the replacement promissory notes contemplated hereby and
the other instruments and documents to be delivered pursuant hereto
and the power and authority of the Obligors to perform and observe
all of the matters and things herein and therein contained, the fact
that the execution and delivery thereof will not nor will the
observance or performance of any of the matters or things herein or
therein provided for, contravene any provision of law known to
counsel after due inquiry or of the charter or by-laws of the
Obligors or of any provision of any material agreement binding upon
the Obligors or effecting any of their properties or assets and as to
the due authorization for and the validity and enforceability of this
Agreement and such other instruments and documents. In expressing
its opinion as to the validity and enforceability hereof and of such
other instruments and documents which are governed by the laws of
Illinois, counsel may assume that the laws of the Illinois do not
differ in any respect material to its opinion from those of the
State of Texas or Oklahoma, depending on the jurisdiction in which
counsel is admitted to practice, and
(J) no Default or Event of Default shall have occurred
and be continuing as of the date all of the above and foregoing
conditions have been satisfied and the Agent shall have received a
certificate to the foregoing effect signed by a responsible officer
of the Company.
III. Exhibits.
Exhibit A to the Credit Agreement is amended and as so amended is
restated in its entirety to read in accord with Exhibit A attached hereto.
IV. The Guaranties and the Collateral Documents.
The Obligors and each of them acknowledge and agree that (i) all
referencs to the Credit Agreement in the Guaranties and the Collateral
Documents shall be deemed referenced to the Credit Agreement as amended
hereby, (ii) all references to the "Notes" in the Guaranties and Collateral
Documents shall be deemed to include references to any promissory notes of the
Company issued pursuant to this Agreement and (iii) that the Guaranties and
Collateral Documents continue in full force and effect and shall extend,
apply, guarantee and secure all indebtedness, obligations and liabilities of
the Obligors or any of them arising under the Credit Agreement as amended
hereby and as the same may from time to time hereafter be amended, modified or
supplemented as well as all indebtedness, obligations and liabilities arising
under the other Loan Documents.
V. Miscellaneous.
Except as specifically amended hereby all of the terms, conditions
and provisions of the Credit Agreement shall stand and remain unchanged and
in full force and effect. No reference to this First Amendment to Credit
Agreement need be made in any instrument or document at any time referring to
the Credit Agreement, a reference to the Credit Agreement or Notes in any of
such to be deemed to be a reference to the Credit Agreement as amended
hereby and to the Notes to be issued by the Company to the Banks pursuant
hereto. No provision hereof may be amended or waived except in a writing
signed by the Company and the Bank (provided that after this amendment becomes
effective then amendments to the Credit Agreement provided for herein may be
approved by the Required Banks as and to the extent permitted by Section 10.13
of the Credit Agreement). This Agreement may be executed in counterparts and
by separate parties hereto on separate counterparts, each to constitute an
original but all but one and the same instrument. This Agreement shall be
construed in accordance with and governed by the internal laws of the State
of Illinois. The section headings used in this Agreement are for reference
only and shall not effect the construction of the Agreement. THIS AGREEMENT
TOGETHER WITH THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR,
-7-
<PAGE> 8
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. The parties hereto
acknowledge and agree that this Agreement shall not be construed more
favorably in favor of one than the other based upon which party drafted the
same, it being acknowledged that all parties contributed substantially to
the negotiation of this Agreement.
Upon your acceptance hereof in the space provided for that purpose
below, this Agreement shall be a contract between us for the uses and purposes
hereinabove set forth.
-8-
<PAGE> 9
Executed and delivered at Chicago, Illinois as of this 30th day of December,
1994.
Hadson Corporation
By /s/ Robert P. Capps
Its Executive Vice President
Hadson Gas Systems, Inc.
By /s/ Robert P. Capps
Its Vice President
United LP Gas Corporation
By /s/ Robert P. Capps
Its Vice President
Western Natural Gas & Transmission Corp.
By /s/ Robert P. Capps
Its Vice President
Accepted and agreed to as of the date last above written.
Bank of Montreal
By /s/ J. Michael Linton
Its Director
The First National Bank of Chicago
By /s/ Daniel B. Catlin
Its Assistant Vice President
The First National Bank of Boston
By /s/ Richard A. Low
Its Division Executive
The Fuji Bank Limited, Houston Agency
By /s/ Masayuki Kawanishi
Its Joint General Manager
Union Bank
By /s/ Carl Stutzman
Its Vice President
-9-
<PAGE> 10
EXHIBIT A
HADSON CORPORATION
REVOLVING CREDIT NOTE
Chicago, Illinois
$__________________ December 30, 1994
On the Termination Date (as that term is defined in the Credit
Agreement hereinafter mentioned), for value received, the undersigned, Hadson
Corporation, a Delaware corporation (the "Company"), promises to pay to the
order of____________________________ (the "Bank"), at the principal office of
Bank of Montreal in Chicago, Illinois, the principal sum of (i)
________________________ Dollars ($_______________), or (ii) such lesser
amount as may at the time of the maturity hereof, whether by acceleration
or otherwise, be the aggregate unpaid principal amount of all loans owing
from the Company to the Bank under the Revolving Credit provided for in the
Credit Agreement hereinafter mentioned.
The Company promises to pay interest (computed on the basis of a
year of 365 or 366 days as appropriate for the actual number of days
elapsed) at such office on the balance of principal from time to time
outstanding and unpaid hereon (i) prior to the maturity hereof (whether by
lapse of time, acceleration or otherwise) at the rate per annum determined by
adding 1% to the Base Rate as from time to time in effect and (ii) from and
after the maturity thereof at the rate per annum determined by adding 3% to
the Base Rate as from time to time in effect, interest to be due and payable
quarterly on the last day of each calendar quarter and at maturity with
interest accruing after maturity to be due and payable on demand. Any change
in the interest rate hereon resulting from a change in the Base Rate (or any
component thereof) shall be and become effective as of and on the date of the
relevant change in the Base Rate or component thereof.
The term "Base Rate" shall mean for any day the greater of:
(i) the rate of interest established from time to time
by Bank of Montreal as the base rate it will use to determine the
rate of interest on United States dollar loans made in the United
States of America and designated by Bank of Montreal as its U.S.
prime rate, it being understood that such rate may not be Bank of
Montreal's best or lowest rate; or
(ii) the sum of (x) the rate for that day set forth
opposite the caption "Federal Fund (Effective)" in the daily
statistical release designated as "Composite 3:30 P.M. Quotations
for U.S. Government Securities", or any successor publication,
published by the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, the rate determined by
Bank of Montreal (based on quotations received from two or more
Federal funds dealers of recognized standing) to be the prevailing
rate per annum (rounded upward, if necessary, to the nearest 1/100
of 1%) at approximately 10:00 A.M. (Chicago time) (or as soon
thereafter as is practicable) on such day for the purchase at face
value of Federal funds in the secondary market in an amount
approximately equal to the principal amount hereof, plus (y) 1/2 of 1%
(0.50%).
Each loan made under the Revolving Credit provided for in the Credit
Agreement by the Bank to the Company against this Note and any repayment of
principal hereon, shall be endorsed by the holder hereof on the reverse side
of this Note or recorded on the books and records of the holder hereof
(provided that such entries shall be endorsed on the reverse side hereof
prior to any negotiation hereof) and the Company agrees that in any action
or proceeding instituted to collect or enforce collection of this Note, the
entries so endorsed on the reverse side hereof or recorded on the books and
records of the Bank shall be prima facie evidence of the unpaid balance of
this Note absent manifest error.
<PAGE> 11
This Note is issued by the Company under the terms and provisions
of a Credit Agreement dated as of December 14, 1993 between the Company,
certain subsidiaries thereof, Bank of Montreal as Agent and the Banks from
time to time party thereto as thereafter amended (the "Credit Agreement")
and is secured, inter alia, by certain instruments and documents from the
Company and others, and this Note and the holder hereof are entitled to all
of the benefits and security provided for thereby or referred to therein,
equally and ratably with all other indebtedness thereby secured, to which
reference is hereby made for a statement thereof. This Note has been issued
in replacement for a Revolving Credit Note of the Company dated
_____________________ in the face principal sum of $__________ and payable
to the order of the Bank (the "Prior Note") and evidences all
indebtedness formerly evidenced by the Prior Note as well as all loans
hereafter made by the Bank to the Company under the Revolving Credit provided
for in the Credit Agreement. This Note may be declared to be, or be and
become, due prior to its expressed maturity upon the occurrence of an Event
of Default specified in the Credit Agreement, voluntary prepayments may be
made hereon, and certain prepayments are required to be made hereon, all in
the events, on the terms and with the effects provided in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAW.
The Company hereby waives presentment for payment and demand.
Hadson Corporation
By:__________________________
Its:_______________________
-2-
<PAGE> 1
EXHIBIT 10.37
December 15, 1994
Santa Fe Energy Resources, Inc.
Santa Fe Energy Operating Partners, L.P.
1616 South Voss Road, Suite 1000
Houston, Texas 77057
RE: Master Gas Purchase Agreement
Gentlemen:
Please refer to that certain Master Gas Purchase Agreement dated
December 14, 1993 by and among Santa Fe Energy Resources, Inc. and Santa Fe
Energy Operating Partners, L.P. (collectively referred to herein as "Seller")
and Adobe Gas Pipeline Company, predecessor in interest to Hadson Gas Systems,
Inc. ("Buyer") which Master Gas Purchase Agreement as heretofore modified or
amended is hereinafter referred to as the "Agreement." Capitalized terms used
and not otherwise defined herein shall have the respective meanings set forth
in the Agreement. Section 11.1 of Article 11 of the Agreement requires Buyer
to pay for gas purchased no later than the last Working Day of the Month
following the production. Buyer and Seller desire to modify such payment
requirement with respect to a portion of gas deliveries. Accordingly, the
parties hereto do hereby agree as follows:
1. With respect to payments due on the last day of December 1994
and the last day of each month thereafter through and including April 1995,
Buyer may, at its discretion, defer payment on up to $5 million of amounts
otherwise due under said Section 11.1 for a period of thirty (30) days without
penalty. However, no deferral shall be permitted for any month unless any
previous deferral has been paid in full. Such deferral shall be accomplished
by Seller refunding such amounts to Buyer by wire transfer from that certain
revenue account No. 278-146-6 at Harris Trust and Savings Bank established in
connection with the Agreement. At the end of each said thirty (30) day period,
all deferred amounts shall be paid to Seller by wire transfer, together with
interest from the date of such deferral calculated at the prime rate in effect
from time to time at Texas Commerce Bank, National Association, plus one
percent (1%).
2. On or after the date of this letter and prior to December 20,
1994, Seller may at its discretion advance funds to Buyer, which advances shall
bear interest from the date of such advance at the rate specified in paragraph
1. above. The amount which may be deferred with respect to amounts due under
the Agreement as of the last Working Day of December 1994 shall be reduced by
the aggregate amount of any such advances.
3. Except as herein expressly modified or amended, the Agreement
shall continue and remain in full force and effect in accordance with all the
terms thereof.
<PAGE> 2
Upon execution by all parties hereto, this letter shall constitute an
agreement binding upon the parties hereto and upon their respective successors
and assigns.
Very truly yours,
HADSON GAS SYSTEMS, INC.
/s/ Greg G. Jenkins
---------------------------------
Greg G. Jenkins
President and
Chief Executive Officer
AGREED TO AND ACCEPTED THIS
15th DAY OF DECEMBER, 1994
SANTA FE ENERGY RESOURCES, INC.
/s/ David L. Hicks
-----------------------------------------
By: David L. Hicks
Title: Vice President and General Counsel
AGREED TO AND ACCEPTED THIS
15th DAY OF DECEMBER, 1994
SANTA FE ENERGY OPERATING
PARTNERS, L. P.
BY SANTA FE PACIFIC EXPLORATION
COMPANY,
MANAGING GENERAL PARTNER
/s/ David L. Hicks
-----------------------------------------
By: David L. Hicks
Title: Vice President and General Counsel
<PAGE> 1
Exhibit 11
COMPUTATION OF FULLY DILUTED EARNINGS/LOSS
PER SHARE (1)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1992 1993 1994
----- ---- ----
<S> <C> <C> <C>
Net loss from continuing operations
as reported $ (15,066) (15,876) (1,033)
Preferred stock dividend requirements (61) (293) (5,772)
Expenses related to 7-3/4% convertible
subordinated debentures 1,978 - -
------------ ------------ ------------
Fully diluted net loss from continuing operations
available to common stock $ (13,149) (16,169) (6,805)
============ ============ ============
Earnings (loss) from discontinued operations,
as reported and fully diluted $ (8,103) 5,553 -
============ ============ ============
Average number of common shares as
reported (primary) 2,826 8,383 25,690
Additional shares assumed issued:
Options - 13 -
7-3/4% convertible subordinated debentures 306 - -
8% Junior Preferred Stock 258 - -
------------ ------------ ------------
Average number of common shares -
fully diluted 3,390 8,396 25,690
============ ============ ============
Fully diluted net loss from continuing operations
per common and common equivalent share $ (3.88) (1.93) (.26)
============ ============ ============
Fully diluted net earnings (loss) from discontinued
operations per common and common equivalent
share $ (2.39) .66 -
============ ============ ============
</TABLE>
(1) This computation is submitted in accordance with Regulation S-K, Item
601(b)(11) although it is contrary to paragraph 10 of APB Opinion No.
15 because it produces an anti-dilutive result.
<PAGE> 1
Exhibit 22
HADSON CORPORATION
<TABLE>
<CAPTION>
STATE OF
NAME OF SUBSIDIARY INCORPORATION
------------------ -------------
<S> <C>
HD Energy Corporation Delaware
Hadson Ecuador, Inc. Oklahoma
Hadson Electric, Inc. Delaware
Hadson Energy Risk Management, Inc. Oklahoma
Hadson Financial Corporation Delaware
Hadson Foundation Oklahoma
Hadson Fuels, Inc. Oklahoma
Hadson Gas Company Delaware
Hadson Gas Gathering & Processing Co. New Mexico
Hadson Gas Marketing Co. Delaware
Hadson Gas Systems, Inc. Oklahoma
Hadson Gas Transmission Company Delaware
Llano, Inc. New Mexico
NMESCO Fuels, Inc. New Mexico
Probe Systems, Inc. California
Ultrasystems Small Power, Incorporated California
Western Natural Gas & Transmission Corp. Colorado
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-51373) and
Forms S-8 (No. 33-26666, 33-68820 and 33-56725) of Hadson Corporation of our
report dated March 3, 1995, appearing on page F-2 of this Form 10-K.
PRICE WATERHOUSE LLP
Oklahoma City, Oklahoma
March 29, 1995
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, HADSON CORPORATION (the "Company"), a Delaware corporation,
intends to file with the Securities and Exchange Commission its Annual
Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, for fiscal year ended December 31, 1994, together with
any and all exhibits and other documents having relation to said Annual Report
on Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of Director of the
Company, does hereby constitute and appoint ROBERT P. CAPPS his true and lawful
attorney-in-fact, with full power of substitution and resubstitution, to
execute in his name, place and stead in the capacity of Executive Vice
President, Chief Financial Officer and Treasurer of the Company said Annual
Report on Form 10-K and all documents necessary or incidental in connection
therewith and to file same with the Securities and Exchange Commission. Said
attorney-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned in any and all capacities every act
whatsoever necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming the acts that said attorney-in-fact may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 22nd day of March, 1995.
/s/ J. Michael Adcock
J. MICHAEL ADCOCK, Director
<PAGE> 2
POWER OF ATTORNEY
WHEREAS, HADSON CORPORATION (the "Company"), a Delaware corporation,
intends to file with the Securities and Exchange Commission its Annual
Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, for fiscal year ended December 31, 1994, together with
any and all exhibits and other documents having relation to said Annual Report
on Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of Director of the
Company, does hereby constitute and appoint ROBERT P. CAPPS his true and lawful
attorney-in-fact, with full power of substitution and resubstitution, to
execute in his name, place and stead in the capacity of Executive Vice
President, Chief Financial Officer and Treasurer of the Company said Annual
Report on Form 10-K and all documents necessary or incidental in connection
therewith and to file same with the Securities and Exchange Commission. Said
attorney-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned in any and all capacities every act
whatsoever necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming the acts that said attorney-in-fact may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 23rd day of March, 1995.
/s/ J. Frank Haasbeek
J. FRANK HAASBEEK, Director
<PAGE> 3
POWER OF ATTORNEY
WHEREAS, HADSON CORPORATION (the "Company"), a Delaware corporation,
intends to file with the Securities and Exchange Commission its Annual
Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, for fiscal year ended December 31, 1994, together with
any and all exhibits and other documents having relation to said Annual Report
on Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of Director of the
Company, does hereby constitute and appoint ROBERT P. CAPPS his true and lawful
attorney-in-fact, with full power of substitution and resubstitution, to
execute in his name, place and stead in the capacity of Executive Vice
President, Chief Financial Officer and Treasurer of the Company said Annual
Report on Form 10-K and all documents necessary or incidental in connection
therewith and to file same with the Securities and Exchange Commission. Said
attorney-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned in any and all capacities every act
whatsoever necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming the acts that said attorney-in-fact may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 23rd day of March, 1995.
/s/ James L. Payne
JAMES L. PAYNE, Director
<PAGE> 4
POWER OF ATTORNEY
WHEREAS, HADSON CORPORATION (the "Company"), a Delaware corporation,
intends to file with the Securities and Exchange Commission its Annual
Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, for fiscal year ended December 31, 1994, together with
any and all exhibits and other documents having relation to said Annual Report
on Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of Director of the
Company, does hereby constitute and appoint ROBERT P. CAPPS his true and lawful
attorney-in-fact, with full power of substitution and resubstitution, to
execute in his name, place and stead in the capacity of Executive Vice
President, Chief Financial Officer and Treasurer of the Company said Annual
Report on Form 10-K and all documents necessary or incidental in connection
therewith and to file same with the Securities and Exchange Commission. Said
attorney-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned in any and all capacities every act
whatsoever necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming the acts that said attorney-in-fact may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 22nd day of March, 1995.
/s/ Michael J. Rosinski
MICHAEL J. ROSINSKI, Director
<PAGE> 5
POWER OF ATTORNEY
WHEREAS, HADSON CORPORATION (the "Company"), a Delaware corporation,
intends to file with the Securities and Exchange Commission its Annual
Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, for fiscal year ended December 31, 1994, together with
any and all exhibits and other documents having relation to said Annual Report
on Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of Director of the
Company, does hereby constitute and appoint ROBERT P. CAPPS his true and lawful
attorney-in-fact, with full power of substitution and resubstitution, to
execute in his name, place and stead in the capacity of Executive Vice
President, Chief Financial Officer and Treasurer of the Company said Annual
Report on Form 10-K and all documents necessary or incidental in connection
therewith and to file same with the Securities and Exchange Commission. Said
attorney-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned in any and all capacities every act
whatsoever necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming the acts that said attorney-in-fact may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 23rd day of March, 1995.
/s/ B. M. Thompson
B. M. THOMPSON, Director
<PAGE> 6
POWER OF ATTORNEY
WHEREAS, HADSON CORPORATION (the "Company"), a Delaware corporation,
intends to file with the Securities and Exchange Commission its Annual
Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, for fiscal year ended December 31, 1994, together with
any and all exhibits and other documents having relation to said Annual Report
on Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of Director of the
Company, does hereby constitute and appoint ROBERT P. CAPPS his true and lawful
attorney-in-fact, with full power of substitution and resubstitution, to
execute in his name, place and stead in the capacity of Executive Vice
President, Chief Financial Officer and Treasurer of the Company said Annual
Report on Form 10-K and all documents necessary or incidental in connection
therewith and to file same with the Securities and Exchange Commission. Said
attorney-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned in any and all capacities every act
whatsoever necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming the acts that said attorney-in-fact may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 26th day of March, 1995.
/s/ R. A. Walker
R. A. WALKER, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet at December 31, 1994, the Consolidated Statement of
Operations for the year ended December 31, 1994, and the Computation of Fully
Diluted Earnings/Loss Per Share for the year ended December 31, 1994, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,109
<SECURITIES> 0
<RECEIVABLES> 77,332
<ALLOWANCES> 1,287
<INVENTORY> 4,858
<CURRENT-ASSETS> 94,074
<PP&E> 137,263
<DEPRECIATION> 36,094
<TOTAL-ASSETS> 205,405
<CURRENT-LIABILITIES> 107,235
<BONDS> 57,372
<COMMON> 257
0
55,079
<OTHER-SE> (16,900)
<TOTAL-LIABILITY-AND-EQUITY> 205,405
<SALES> 752,470
<TOTAL-REVENUES> 754,038
<CGS> 723,546
<TOTAL-COSTS> 723,546
<OTHER-EXPENSES> 28,375
<LOSS-PROVISION> 489
<INTEREST-EXPENSE> 5,154
<INCOME-PRETAX> (3,037)
<INCOME-TAX> (2,004)
<INCOME-CONTINUING> (1,033)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,033)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
