-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UsyzYJImc83roks7k1o7FsBp/bj59AXQl3NFf1pJoYFn4m+YsG7eZAxJI9zANfD+ +cvKKXgbSr+tX0bECAbI8g== 0000909518-94-000008.txt : 19961001 0000909518-94-000008.hdr.sgml : 19961001 ACCESSION NUMBER: 0000909518-94-000008 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19940118 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HADSON CORP CENTRAL INDEX KEY: 0000044801 STANDARD INDUSTRIAL CLASSIFICATION: 4922 IRS NUMBER: 310679954 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-14102 FILM NUMBER: 94501682 BUSINESS ADDRESS: STREET 1: 101 PARK AVE STREET 2: 14TH FL CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 BUSINESS PHONE: 4052359531 MAIL ADDRESS: STREET 1: 101 PARK AVENUE, SUITE 1400 CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 FORMER COMPANY: FORMER CONFORMED NAME: HADSON PETROLEUM CORP DATE OF NAME CHANGE: 19880508 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL INSURANCE CO OF AMERICA CENTRAL INDEX KEY: 0000729057 STANDARD INDUSTRIAL CLASSIFICATION: 6311 IRS NUMBER: 221211670 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: PRUDENTIAL PLZ STREET 2: 751 BROAD STREET CITY: NEWARK STATE: NJ ZIP: 07102-3777 SC 13D 1 SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. ____) Hadson Corporation - - -------------------------------------------------------------------------- (Name of Issuer) Common Stock 40501V101 - - ----------------------------------- ----------------------------------- (Title of class of securities) (CUSIP number) Thomas P. Donahue 4900 Renaissance Tower 1201 Elm Street Dallas, TX 75270 (214) 745-4606 12/14/93 - - ----------------------------------- ----------------------------------- (Name, address and telephone number (Date of event which requires of person authorized to receive filing of this statement) notices and communications) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [x]. Check the following box if a fee is being paid with the statement [_]. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) CUSIP No. 40501V101 13D - Page 2 1 NAME OF REPORTING PERSON: The Prudential Insurance Company of America S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 22-1211670 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [x] 3 SEC USE ONLY 4 SOURCE OF FUNDS:* 00 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [_] PURSUANT TO ITEM 2(d) OR 2(e): 6 CITIZENSHIP OR PLACE OF A mutual life insurance ORGANIZATION: company organized under the laws of New Jersey NUMBER OF 7 SOLE VOTING POWER: 6,317,944 SHARES BENEFICIALLY 8 SHARED VOTING POWER: -- OWNED BY EACH 9 SOLE DISPOSITIVE POWER: 1,329,763 REPORTING PERSON WITH 10 SHARED DISPOSITIVE POWER: -- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 6,317,944 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [_] CERTAIN SHARES:* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 24.6% 14 TYPE OF REPORTING PERSON:* BD, IC, IA ITEM 1. SECURITY AND ISSUER. ------ ------------------- This Schedule 13D relates to the shares of common stock, par value $.01 per share (the "Common Stock") of Hadson Corporation (the "Issuer"), which has its principal executive office at 101 Park Avenue, Suite 1400, Oklahoma City, Oklahoma 73102. The Prudential Insurance Company of America, a New Jersey mutual insurance corporation, for itself and its affiliates Pruco Life Insurance Company and PruSupply, Inc. (collectively "Prudential"), previously filed a statement on Schedule 13G dated February 9, 1990, as amended on February 11, 1991, February 11, 1992, and February 5, 1993, reflecting its beneficial ownership of securities of the Issuer. ITEM 2. IDENTITY AND BACKGROUND. ------ ----------------------- This statement is filed by Prudential which has its principal business and principal office at 751 Broad Street, Newark, New Jersey 07102. The following lists the current directors (the "Directors") of The Prudential Insurance Company of America and their principal occupations; unless otherwise noted, their business address is 751 Broad Street, Newark, New Jersey 07102: James G. Affleck has been retired since 1984. Robert E. Beck has been retired since 1992. William W. Boeschenstein is the Chairman of the Board and Chief Executive Officer of Owens-Corning Fiberglass Corporation, Fiberglass Tower, Toledo, Ohio 43659, which engages in the business of manufacturing fiberglass products. Robert J. Boutillier has been retired since 1982. James E. Burke has been retired since 1990. Brendan T. Byrne is a partner in the law firm of Carella, Byrne, Bain, Gillfillan, Cecchi & Stewart, 6 Becker Farm Road, Roseland, New Jersey 07066. Lisle C. Carter, Jr. is a partner in the law firm of Verner Liipfert, Bernhard, McPherson & Hand, Chartered, 1307 Fourth Street, S.W., Washington, D.C. 20024. Carolyne K. Davis is a Health Care Advisor at the accounting firm of Ernst & Young, 1200 Nineteenth Street, N.W. Washington, D.C. 20036. William H. Gray, III is President and Chief Executive Officer of the United Negro College Fund, Inc., 500 East 62nd Street, New York, New York 10021. Jon F. Hanson is Chairman of Hampshire Management Co., 235 Moore Street, Suite 200, Hackensack, New Jersey 07601. Allen F. Jacobson has been retired since 1991. Garnett L. Keith, Jr. is Vice Chairman of Prudential. James C. Kellogg is a partner in the law firm of Townley & Updike, 405 Lexington Avenue, New York, New York 10174. Burton G. Malkiel is a Professor of Economics at Princeton University, 110 Fisher Hall, Prospect Avenue, Princeton University, Princeton, New Jersey 08544. John R. Opel has been retired since 1993. Donald E. Procknow has been retired since 1986. Robert H. Schaeberle is Chairman Emeritus of Nabisco Brands, Inc., 200 DeForest Avenue, East Hanover, New Jersey 077936. Richard M. Thomson is Chairman of the Board and Chief Executive Officer of the Toronto-Dominion Bank, Toronto-Dominion Centre, Toronto, Ontario M5K 1A2, Canada. P. Roy Vagelos, M.D. is Chairman and Chief Executive Officer of Merck & Co., Inc., a manufacturer of pharmaceuticals, 126 East Lincoln Avenue, Rahway, New Jersey 07065. Stanley C. Van Ness is an attorney at the law firm of Picco Mack Herbert Kennedy Jaffe Perrella and Yoskin, One State Street Square, Suite 1000, Trenton, New Jersey 08607. Paul A. Volcker is Chairman of James D. Wolfenshohn, Inc., 599 Lexington Avenue, New York, New York 10022. Robert C. Winters is Chairman of the Board, President and Chief Executive Officer of Prudential. The following persons are the current executive officers (the "Officers") and controlling persons of Prudential, and each of their business addresses is 751 Broad Street, Newark, New Jersey: Robert C. Winters - Chairman of the Board, President and Chief Executive Officer Garnett L. Keith, Jr. - Vice Chairman William P. Link - Executive Vice President ("EVP") Edward D. Zinbarg - EVP Robert P. Hill - EVP Robert E. Riley - EVP, Prudential Reinsurance Company James W. Stevens - Chairman and Chief Executive Officer, Prudential Asset Management Group William M. Bethke - President, Capital Markets Group Stephen R. Braswell - Vice President, Investment Services Group John D. Brookmeyer - Senior Managing Director, Prudential Global Asset Management E. Michael Caulfield - President, Prudential Preferred Financial Services Robert M. Chmely - Chief Financial Officer, Prudential Asset Management Group Martha J. Clark - President, Prudential Asset Management Company James E. Dwane - President, Prudential Reinsurance William S. Field - Chairman, Prudential Equity Investors, Inc. James R. Gillen - Senior Vice President and General Counsel Bruce J. Goodman - President, Prudential Business Systems Nicholas M. Graves - President, Private Placement Group Allen M. Haight - President, AARP Operations Samuel H. Havens - President, Group Operations Eugene B. Heimberg - President and Chief Investment Officer, Prudential Investment Company William G. Hunt, Jr. - Senior Vice President and Chief Marketing Officer, Prudential Preferred Financial Services Milan E. Johnson - Chairman and Chief Executive Officer, Prudential Residential Services Company S. Ross Johnson - President, Canadian Operations Ira J. Kleinman - President, Prudential Select Marketing Company Donald C. Mann - Senior Vice President John P. Murray - EVP and Diector of Corporate Risk Management Eugene M. O'Hara - Senior Vice President, Comptroller and Chief Financial Officer I. Edward Price - President, International Insurance Donald G. Southwell - President, Prudential Insurance and Financial Services Dorothy K. Light - Vice President and Secretary Martin Pfinsgraff - Vice President and Treasurer Prudential, the Directors and the Officers are collectively referred to herein, as the "Enumerated Persons." Each of the Directors and Officers is an American citizen, with the exception of Messrs. S. Ross Johnson and Richard M. Thomson, who are Canadian citizens. Based upon the knowledge of Prudential and without independent verification, none of the Enumerated Persons has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), nor have any of the Enumerated Persons, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. ------ ------------------------------------------------- Prudential acquired beneficial ownership of the shares of Common Stock reported in Item 5 upon the conversion of certain securities of the Issuer previously owned by Prudential, pursuant to the merger consummated on December 14, 1993 (the "Merger") of Adobe Pipeline Gas Company, an indirect wholly-owned subsidiary of Santa Fe Energy Resources, Inc. ("SFER"), and a direct wholly-owned subsidiary of SFER Pipeline, Inc. ("Pipeline", and collectively with SFER, "Santa Fe") with and into the Issuer. The Merger was consummated pursuant to the Agreement of Merger, dated as of July 28, 1993, as amended, by and among the Issuer and Santa Fe. Prior to the Merger and certain related transactions, Prudential held the securities of the Issuer as set forth in the left- hand column of the following table. The right-hand column reflects the securities of the Issuer that Prudential received as a result of the Merger and the related transactions. Pre-Merger Securities Converted into or Exchanged For --------------------- ------------------------------- 49,500 shares of 7% Senior (i) an aggregate of 553,658 shares Cumulative Preferred Stock of Common Stock, (ii) a beneficial interest in the H/P Trust (defined in Item 5) and (iii) $33 million aggregate principal amount of the Senior Secured Notes (defined below) 300,000 shares of Common Stock (i) 20,001 shares of Common Stock and (ii) 5,001 shares of Junior Preferred Stock (defined below), each share of which is presently exercisable for one share of Common Stock 72,704,000 shares of Class B A beneficial interest in the Common H/P Trust 11,341,000 shares of Class C 756,104 shares of Common Stock Common Stock $23.4 million of 6.20% Senior $23.4 million of the Senior Secured Notes due 2000 Secured Notes In summary, upon the consummation of the Merger and the related transactions, Prudential directly held an aggregate of 1,329,763 shares of Common Stock, a beneficial interest in the H/P Trust (which, as described in Item 5 below, owns 4,983,180 shares of Common Stock), 5,001 shares of Junior Exchangeable Automatically Convertible Preferred Stock, Series B, of the Issuer (the "Junior Preferred Stock") presently exercisable for 5,001 shares of Common Stock, and $56.4 million of the Issuer's 8% Senior Secured Notes due 2003 (the "Senior Secured Notes"). Each share of Junior Preferred Stock is exercisable for one share of Common Stock upon the payment of the exercise price in effect at the time of exercise and the delivery of certificate representing the Junior Preferred Stock to the Company. The Junior Preferred Stock automatically converts into .001 of a share of Common Stock, subject to certain adjustments, on the earlier of (i) the thirty-first day after the Common Stock has reached a certain reported sales price for 40 consecutive trading days or (ii) December 14, 1995. ITEM 4. PURPOSE OF TRANSACTION. ------ ---------------------- Prudential acquired the Common Stock reported in Item 5 in the ordinary course of business, as a result of the Merger. Prudential's investment in the Common Stock beneficially owned by it is solely for investment purposes. Other than as contemplated by the Trust Agreement (as defined in Item 5), the Voting Agreement or the Registration Rights Agreement (each as defined in Item 6), neither Prudential nor, to the best of Prudential's knowledge without investigation, any other Enumerated Person has any plans or proposals which relate to, or would result in any actions listed in (a) through (j) inclusive, of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. ------ ------------------------------------ DESCRIPTION OF THE H/P TRUST ---------------------------- Pursuant to a Trust Agreement, dated as of December 14, 1993 (the "Trust Agreement") by and among the Issuer, Prudential and Liberty Bank and Trust Company of Oklahoma City, N.A. (the "Trustee"), a trust (the "H/P Trust") was formed and was funded by the Issuer with 4,983,180 shares of Common Stock (the "Trust Shares"). Initially, all Trust Shares are designated as "Unclassified Shares" for purposes of the Trust Agreement. Any Trust Shares that are from time to time classified as described below will be designated as "Classified Shares" for purposes of the Trust Agreement. Pursuant to the Trust Agreement, the Company is obligated to cause the transfer agent for the Junior Preferred Stock to deposit to the H/P Trust all proceeds from the exercise of shares of Junior Preferred Stock. At the end of each calendar quarter and upon termination of the H/P Trust, the Trustee will compute the amount of such exercise proceeds deposited to the H/P Trust since the last classification of Trust Shares, if any, and the number of Exercise Units (as defined below) represented thereby. "Exercise Units" means the amount of exercise proceeds deposited to the H/P Trust at any given time divided by the exercise price (the price per share of Common Stock required to be paid upon exercise of shares of Junior Preferred Stock) in effect on the date of the exercise giving rise to such proceeds, after taking into account any adjustments to such price. If, as of the last day of each calendar quarter or as of the termination date of the trust (each such date, a "Reporting Date"), the number of Exercise Units represented by exercise proceeds deposited to the H/P Trust since the last classification of Trust Shares is greater than the number (rounded to the next higher whole number, if fractional) equal to the quotient of (A) 20% of the sum of (1) the number of Unclassified Shares in the H/P Trust immediately prior to the date of such calculation plus (2) the number of shares of Common Stock directly held by Prudential immediately prior to the Reporting Date divided by (B) the difference between (1) 100% minus (2) 80% of the fraction (not greater than one) determined by dividing (x) the sum of (I) the number of the Unclassified Shares in the H/P Trust immediately prior to the date of such calculation plus (II) the number of shares of Common Stock directly held by Prudential immediately prior to the Reporting Date by (y) the number of all of the shares of Common Stock issued and outstanding immediately before the date of such calculation, treating any Classified Shares as not being issued or outstanding and treating any Unclassified Shares that are constructively owned by Prudential under Section 318 of the Internal Revenue Code of 1986, as amended, as being issued and outstanding, then the Trustee will (x) pay the principal amount of all exercise proceeds deposited since the last classification of Trust Shares to Prudential, (y) pay to the Issuer all other funds in the H/P Trust (except such amount as the Trustee, in its sole discretion, shall decide to retain for the payment of expenses), and (z) classify that number of Unclassified Shares that is equal to the number of Exercise Units corresponding to the amount of exercise proceeds deposited to the H/P Trust since the last classification of Trust Shares, and distribute such Classified Shares to the Issuer for cancellation. The H/P Trust has a minimum term of seven months. Thereafter, the H/P Trust will terminate on the day after all of the outstanding shares of Junior Preferred Stock have been exercised for or converted into Common Stock (as described in Item 3), but, in any event, no later than December 15, 1995. Upon termination of the H/P Trust (after first determining whether a Classification Event has occurred and making the distributions according to (x), (y) and (z) above), the Trustee will distribute the balance of Unclassified Shares in the H/P Trust to Prudential and will distribute all other assets in the H/P Trust, including any Classified Shares, to the Issuer. Under the Trust Agreement neither the Trustee, Prudential nor the Issuer has the power to sell, transfer, assign, pledge, hypothecate, encumber or in any manner dispose of the Trust Shares other than as described above. The Trustee also is obligated to vote the Unclassified Shares in accordance with the instructions of Prudential. RESPONSE TO ITEMS 5(A)-(E) -------------------------- (a) Prudential directly owns 1,329,763 shares of Common Stock and, pursuant to the Trust Agreement, has power to direct the Trustee to vote the 4,983,180 shares of Common Stock held by the Trust. Prudential has the right to acquire up to 5,001 shares of Common Stock upon the exercise of the shares of the Junior Preferred Stock it holds. Accordingly, Prudential may be deemed to beneficially own a total of 6,317,944 shares of Common Stock which represents 24.6% of the outstanding Common Stock. As of the date of this Schedule 13D and based upon the knowledge of Prudential without independent verification, none of the other Enumerated Persons beneficially owns any shares of the Common Stock. Prudential expressly disclaims membership in a group with SFER or Pipeline or both, for purposes of Rule 13d-5(b)(1) under the Securities Exchange Act of 1934, as amended (the "Act"), and further expressly disclaims that it beneficially owns any shares of Common Stock beneficially owned by SFER or Pipeline. (b) Prudential has the sole power to vote, or direct the voting of, 6,317,944 shares of Common Stock, assuming Prudential's exercise of the Junior Preferred owned by it. Prudential has the sole power to dispose, or to direct the disposition of, the 1,329,763 shares of Common Stock held directly by it. Prudential does not, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, have or share investment power (as defined in Rule 13d-3(a)(2) under the Act) or investment control (as used in Rule 16a-8(a)(3) under the Act) with respect to the Trust Shares, including the power to dispose, or to direct the disposition of, the Trust Shares. As of the date of this Schedule 13D and based upon the knowledge of Prudential without independent verification, none of the other Enumerated Persons has the power to vote or dispose of any shares of Common Stock. (c) Except in connection with the Merger as described in Item 3, Prudential has not effected any transactions in the Common Stock during the preceding 60 days. As of the date of this Schedule 13D and based upon the knowledge of Prudential without independent verification, none of the other Enumerated Persons has effected any transactions in the Common Stock during the preceding 60 days. (d) No person other than Prudential is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds of the sale of, the shares of Common Stock beneficially owned by it. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS ------ WITH RESPECT TO SECURITIES OF THE ISSUER -------------------------------------------------------- Prudential is a party to three agreements with respect to the shares of Common Stock beneficially owned by it: (i) the Trust Agreement (as described in response to Item 5 which is incorporated herein by reference), (ii) the Voting Agreement (defined below), and (iii) the Registration Rights Agreement (defined below). In addition, Prudential and the Issuer are parties to a Securities Purchase Agreement (defined below) pursuant to which the Issuer's Senior Secured Notes were issued. VOTING AGREEMENT ---------------- In connection with the Merger and the related transactions, Prudential and Santa Fe entered into a Voting Agreement dated December 14, 1993 (the "Voting Agreement"), in which each party agreed to vote the shares of Common Stock beneficially owned by it (which, in the case of Prudential, includes the Trust Shares) in favor of persons designated by the parties from time to time for election to the board of directors of the Issuer. As a result of the Merger, the Issuer's entire board of directors consists of eight directorships, divided into three classes, with staggered terms. Each of Santa Fe and Prudential have agreed to vote all of the shares of Common Stock beneficially owned by it so as to cause: (i) 50% of the number of directorships constituting the entire board of directors of the Issuer to be designated by Santa Fe, (ii) one person designated by Prudential to be elected as a Class I director of the Issuer and (iii) until the expiration of the initial term of a Class III directors at the third annual meeting of stockholders following the Merger, one person jointly designated by Santa Fe and Prudential to be elected as a Class III director of the Issuer. Each of SFER and Prudential has granted reciprocal irrevocable proxies with respect to the shares of Common Stock beneficially owned by it, which proxies can be exercised solely upon the failure of the grantor thereof to vote the shares of Common Stock beneficially owned by it in accordance with the Voting Agreement. The Voting Agreement further provides that each of Santa Fe and Prudential will vote all shares of Common Stock beneficially owned by it against any proposed amendments to Section 3.03 of the Issuer's By-laws, which governs the filling of vacancies on the Board, and against any proposed amendment to Article 7 of the Issuer's Certificate of Incorporation, which governs the amendment of such By- laws provisions. The Voting Agreement terminates by its terms upon the earlier to occur of (i) the tenth anniversary of the Merger and (ii) such time as Prudential no longer beneficially owns at least 756,100 shares of Common Stock. REGISTRATION RIGHTS AGREEMENT ----------------------------- Pursuant to the Merger Agreement, the Issuer entered into the Registration Rights Agreement, dated as of December 14, 1993 (the "Registration Rights Agreement"), with Santa Fe and Prudential pursuant to which each of Santa Fe and Prudential will be entitled to certain demand and "piggyback" registration rights with respect to the shares of capital stock of the Company issued to it in the Merger as described below and, with respect to Prudential, any shares of Common Stock that may be received by Prudential upon the termination of the H/P Trust. Pursuant to the Registration Rights Agreement, Prudential will have the right, subject to certain limitations, exercisable one time in any 12-month period, to require the Issuer to register, pursuant to the Securities Act of 1933, as amended (the "Securities Act"), the offer and sale of (i) the Common Stock received by Prudential pursuant to the Merger, and (ii) any shares of Common Stock that may be received by Prudential upon the termination of the H/P Trust. All expenses in connection with the first two such demand registrations will be borne by the Issuer; all expenses in connection with subsequent demand registrations will be borne by Prudential and any other selling stockholders. In addition, Prudential will have the right to include shares of Common Stock held by it in any registration statement filed by the Issuer pursuant to the Securities Act (including any registration statement of the Issuer required by Santa Fe but excluding any registration statement filed by the Issuer in connection with an employee stock plan). The Issuer will pay all expenses incurred in connection with any such "piggyback" registrations other than registration fees relating to the shares of Common Stock to be sold for the account of Prudential in connection with such registrations, fees and expenses of counsel for Prudential and certain other expenses (which will be paid by Prudential). SECURITIES PURCHASE AGREEMENT ----------------------------- In connection with the Merger, Prudential and the Issuer entered into a Securities Purchase Agreement dated as of December 14, 1994 (the "Securities Purchase Agreement") pursuant to which the Issuer issued to Prudential (i) $23.4 million aggregate principal amount of Senior Secured Notes in exchange for the $23.4 million aggregate principal amount of the 6.20% Senior Secured Notes due 2000 then held by Prudential, and (ii) $33 million aggregate principal amount of Senior Secured Notes in partial consideration for the conversion of Prudential's shares of the Issuer's 7% Senior Cumulative Preferred Stock pursuant to the Merger (see the table set out in Item 3). The Securities Purchase Agreement contains customary representations, warranties, covenants and indemnification provisions. The Senior Secured Notes are secured by a first priority lien granted to a collateral agent for the benefit of Prudential and another senior secured lender of the Issuer, primarily on the outstanding capital stock of certain of the Issuer's subsidiaries and on the accounts receivable and other personal property of the Issuer. Further, Prudential expressly disclaims membership in a group with either Santa Fe or Pipeline or both, and expressly disclaims that it beneficially owns any shares of Common Stock held by either Santa Fe or Pipeline at any time. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. -------------------------------- 1. Trust Agreement. 2. Voting Agreement. 3. Registration Rights Agreement. 4. Securities Purchase Agreement. SIGNATURE --------- After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 17, 1994 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Jack L. Pfeilsticker --------------------------- Name: Jack L. Pfeilsticker Title: Assistant General Counsel INDEX TO EXHIBITS 1. Trust Agreement dated as of December 14, 1993 by and among Hadson Corporation, The Prudential Insurance Company of America, Pruco Life Insurance Company, PruSupply, Inc., and Liberty Bank and Trust Company of Oklahoma City, N.A., as Trustee. 2. Voting Agreement dated as of December 14, 1993 by and among The Prudential Insurance Company of America, Pruco Life Insurance Company, PruSupply, Inc., Santa Fe Energy Resources, Inc. and SFER Pipeline, Inc. 3. Registration Rights Agreement dated as of December 14, 1993 by and among Hadson Corporation, The Prudential Insurance Company of America, Pruco Life Insurance Company, PruSupply, Inc., Santa Fe Energy Resources, Inc. and SFER Pipeline, Inc. 4. Securities Purchase Agreement dated as of December 14, 1993 by and among Hadson Corporation, The Prudential Insurance Company of America, Pruco Life Insurance Company and PruSupply, Inc. EX-1 2 TRUST AGREEMENT TRUST AGREEMENT AGREEMENT AND DECLARATION OF TRUST, dated as of December 14, 1993, by and among Hadson Corporation ("Hadson"), The Prudential Insurance Company of America ("Prudential Insurance Company"), Pruco Life Insurance Company ("Pruco") and PruSupply Inc. ("PruSupply"), and Liberty Bank and Trust Company of Oklahoma City, N.A., a National Banking Association with principal offices at Oklahoma City, Oklahoma (the "Original Trustee"). W I T N E S S E T H: -------------------- WHEREAS, the Board of Directors and stockholders of Hadson have approved an Agreement of Merger dated as of July 28, 1993, as amended (the "Merger Agreement"), relating to the proposed merger (the "Merger") of Adobe Gas Pipeline Company, a wholly- owned subsidiary of Santa Fe Energy Resources, Inc., with and into Hadson; and WHEREAS, Prudential Insurance Company, Pruco and PruSupply collectively own and hold (i) 300,000 shares of the Common Stock of Hadson, par value $.01 per share, (ii) all of the outstanding shares of the Class B Common Stock of Hadson, par value $.01 per share, (iii) all of the outstanding shares of the Class C Common Stock of Hadson, par value $.01 per share, and (iv) all of the outstanding shares of the 7% Senior Cumulative Preferred Stock of Hadson, Series A, par value $.01 per share; and WHEREAS, the Merger Agreement contemplates that Prudential Insurance Company, Pruco and PruSupply shall receive, in exchange for their Class B Common shares and a portion of their 7% Senior Cumulative Preferred shares, a beneficial interest in a trust to be funded with 4,983,180 shares of the common stock of Hadson, par value $.01 per share, as the surviving corporation in the Merger (the "New Hadson Common Shares"), subject to certain rights retained by Hadson; NOW, THEREFORE, in consideration of the premises and other valuable consideration, and subject to the terms and provisions contained in this Trust Agreement, it is hereby agreed as follows: ARTICLE I. THE TRUST FUND 1.01 Initial Funding. Immediately after the Merger becomes effective, Hadson shall transfer, assign and deliver to the Trustee FOUR MILLION NINE HUNDRED EIGHTY-THREE THOUSAND ONE HUNDRED EIGHTY (4,983,180) New Hadson Common Shares (the "Initial Contribution"). 1.02 Undertaking of the Trustee. Upon receipt of the Initial Contribution, the Trustee shall hold such shares, and any additional property received by the Trustee pursuant to this Trust Agreement, in a separate trust in accordance with the provisions of this Trust Agreement. 1.03 Ownership and Control of Trust Fund. Except as expressly provided hereunder, the beneficiaries under this Trust Agreement shall have no title or right to, or possession, management or control of, the Trust Fund. The whole title to all of the Trust Fund shall be vested in the Trustee and the sole interest of the beneficiaries under this Trust Agreement shall be the rights and benefits given to such persons under this Trust Agreement. ARTICLE II. NAME AND DEFINITIONS 2.01 Name. This trust shall be known as the H/P Trust. 2.02 Terms Defined in the Recitals. Terms defined in the recitals hereto have the meanings ascribed therein. 2.03 Additional Terms Defined. For purposes of this Trust Agreement the following words and expressions shall have the following meanings and usages: "Automatic Conversion": The conversion of the New Hadson -------------------- Junior Preferred Shares into New Hadson Common Shares on the earlier of (i) the occurrence of the Early Automatic Conversion Date (as defined in Article 4 Section 8.a. of the Charter) and (ii) the 2nd anniversary of the Merger. "Beneficiaries": Prudential and Hadson. ------------- "Charter": The Certificate of Incorporation of Hadson in ------- effect on the Effective Date. "Classification Date": any Reporting Date as of which the ------------------- number of Exercise Units collected since the last Measurement Date is greater than the number (rounded to the next higher whole number, if fractional) equal to the quotient of (A) 20% of the sum of (1) the number of Unclassified Shares held in the Trust Fund immediately prior to such Reporting Date plus (2) the number of Prudential's New Hadson Common Shares immediately prior to such Reporting Date, divided by (B) the difference between (1) 100% minus (2) 80% of the fraction (not greater than one) determined by dividing (x) the sum of (I) the number of Unclassified Shares held in the Trust Fund immediately prior to such Reporting Date plus (II) the number of Prudential's New Hadson Common Shares immediately prior to such Reporting Date, by (y) the number of all of the issued and outstanding New Hadson Common Shares immediately before such Reporting Date, treating 2 any Classified Shares held in the Trust Fund immediately prior to such Reporting Date as not being issued or outstanding and treating any Unclassified Shares that are constructively owned by Prudential under Section 318 of the Code as being issued and outstanding. "Classified Shares": all of the Trust's New Hadson Common ----------------- Shares that have been designated as Classified Shares pursuant to Section 4.06(c). "Code": the Internal Revenue Code of 1986, as amended from ---- time to time. Any reference to a Section of the Code shall be deemed to refer as well to any subsequent provision of law enacted in its place, and shall be deemed to include all Treasury Regulations promulgated under the Code interpreting or applying that Section. "Conversion Notice": the notice required to be delivered by ----------------- Hadson to the holders of the New Hadson Junior Preferred Shares advising them of the automatic conversion of the New Hadson Junior Preferred Shares into New Hadson Common Shares. "Effective Date": the date on which the Merger becomes -------------- effective. "Exercise Price": the price per New Hadson Common Share -------------- required to be paid at any given time pursuant to Article 4 Section C.6. of the Charter in order to exercise a New Hadson Junior Preferred Share to purchase New Hadson Common Shares, after taking into account any adjustments required under the provisions of the Charter. "Exercise Price Transfer Period": shall mean (i) for so ------------------------------ long as the Trustee and Transfer Agent are the same or are affiliated, within one business day after any New Hadson Junior Preferred Shares are exercised; (ii) in all other circumstances, on each Friday for all exercises of New Hadson Junior Preferred Shares during the period ending on the Wednesday of such week and starting on the Thursday of the preceding week; provided, however, that if the aggregate amount -------- ------- received during such period (plus any amounts held over from prior periods) is less than $50,000, all such amounts shall be held by the Transfer Agent until the subsequent period and added to amounts received in such subsequent period; and (iii) notwithstanding and in addition to the foregoing, on the date of termination of the Trust in accordance with the terms hereof. "Exercise Proceeds": all amounts received by the Trustee ----------------- from Hadson pursuant to Section 4.05. "Exercise Units": the amount of Exercise Proceeds received -------------- by the Trustee at any given time divided by the Exercise 3 Price in effect on the date of exercise giving rise to such Exercise Proceeds. "General Fund": the assets comprising the Trust Fund other ------------ than New Hadson Common Shares. "Hadson's Transfer Agent": the institution retained by ----------------------- Hadson from time to time as transfer agent with respect to New Hadson Junior Preferred Shares. "income": the income of the Trust as determined under the ------ terms of this Trust Agreement and applicable law, not including stock dividends or other distributions in the form of New Hadson Common Shares. "Measurement Date": the Effective Date and each ---------------- Classification Date. "New Hadson Junior Preferred Shares": shares of the Junior ---------------------------------- Exercisable Automatically Convertible Preferred Stock, Series B, par value $.01 per share, of Hadson, as surviving corporation in the Merger. "Notice": the tangible expression of a communication sent, ------ an instruction or direction given, or an action taken, pursuant to this Trust Agreement. A Notice shall be effective only if it conforms to the requirements of Section 13.05. "Prudential": Prudential Insurance Company, as nominee and ---------- agent for itself, and its wholly-owned affiliates Pruco and PruSupply, as provided in Section 9.02. "Prudential's New Hadson Common Shares": 1,329,763 New ------------------------------------- Hadson Common Shares. "Reporting Date": (i) prior to the delivery of the -------------- Conversion Notice, the last day of each calendar quarter and (ii) after the delivery of the Conversion Notice, the Termination Date. "Termination Date": the date upon which the Trust ---------------- terminates pursuant to Section 3.01. "Trust": the separate trust held under this Trust ----- Agreement. "Trust Agreement": this Trust Agreement, as amended from --------------- time to time. "Trust Fund": all property (principal plus accrued, ---------- accumulated and undistributed income) that, at any particular time, belongs to the Trust. 4 "Trust Term": the period from the date of execution of this ---------- Trust Agreement though and including the Termination Date. "Trustee": each Trustee and all Trustees (including the ------- Original Trustee) serving under this Trust Agreement at any particular time. "Trust's New Hadson Common Shares": all of the New Hadson -------------------------------- Common Shares held in the Trust Fund from time to time. "Unclassified Shares": all of the Trust's New Hadson Common ------------------- Shares that have not been reclassified pursuant to Section 4.06(c). 2.04 Gender and Number. Except where the context otherwise requires, words importing the masculine gender include the feminine and the neuter, if appropriate, words importing the singular number shall include the plural number and vice versa and words importing persons shall include firms, associations, corporations and other entities. 2.05 Subdivision References. All references herein to Articles, Sections and other subdivisions refer to the corresponding Articles, Sections and other subdivisions of this Trust Agreement, and the word "herein" and words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or subdivisions of this Trust Agreement. 2.06 Titles. The Article titles and Section headings in this Trust Agreement are included solely for purposes of identification, and are not be used to construe any provision contained in this Trust Agreement or for any other purpose. ARTICLE III. DURATION AND TERMINATION OF TRUST 3.01 Duration. The Trust shall terminate one (1) day after the later to occur of the following events: (i) the date occurring seven (7) months after completion of the transfer and delivery of the Initial Contribution to the Trustee pursuant to Section 1.01; or (ii) the earliest date on which all New Hadson Junior Preferred Shares have been converted, whether by the exercise by the holder thereof or by Automatic Conversion, into New Hadson Common Shares. 5 3.02 Rule against Perpetuities. Notwithstanding any other provision of this Trust Agreement, and particularly notwithstanding the provisions of Section 3.01, the Trust shall terminate, if it shall not have previously terminated, one (1) day before the twentieth (20th) anniversary of the Effective Date. 3.03 Termination by Beneficiaries. The Trust may not be revoked or terminated at any time prior to the Termination Date by the Beneficiaries and/or the Trustee. 3.04 Continuance of Trust for Winding Up. After the Termination Date, and solely for the purpose of liquidating and winding up the affairs of the Trust, the Trustee shall continue to act as such until its duties have been fully performed. ARTICLE IV. ADMINISTRATION OF THE TRUST FUND 4.01 No Disposition of the Trust's New Hadson Common Shares. The Trustee shall not sell, transfer, assign, pledge, hypothecate, encumber or in any other manner dispose of the Trust's New Hadson Common Shares except as expressly provided in Sections 4.06(d) and 4.07. 4.02 Voting the Trust's New Hadson Common Shares. The Trustee shall, at any meeting at which the Trust's New Hadson Common Shares are eligible to vote (or in connection with any solicitation of consents with respect to which the Trust's New Hadson Common Shares are entitled to consent), vote (or consent with respect to) all of the Trust's New Hadson Common Shares that are Unclassified Shares in accordance with the instructions of Prudential. 4.03 Payment of Claims, Expenses and Liabilities. In accordance with Article X, the Trustee shall pay from the General Fund all claims, expenses, charges, liabilities and obligations of the Trust Fund as contemplated by this Trust Agreement and as required by law. Furthermore, no such charges may be charged against or paid from the Trust's New Hadson Common Shares, from the principal amount of any Exercise Proceeds held by the Trustee, or from any cash dividends paid with respect to the Unclassified Shares. 4.04 Disposition of Net Income. The Trustee shall collect all of the net income of the Trust Fund and shall hold or dispose of the same as follows: (a) The Trustee shall distribute all net income comprised of dividends and other distributions paid with respect to Unclassified Shares to Prudential immediately upon receipt. 6 (b) Subject to the provisions of Section 10.02(b), the Trustee shall distribute all net income comprised of dividends and other distributions paid with respect to Classified Shares to Hadson immediately upon receipt. (c) The Trustee shall accumulate and add to the General Fund all other net income earned on the Trust Fund (including net income earned on investments made pursuant to Section 7.02). 4.05 Collection of Exercise Proceeds. (a) Hadson shall direct Hadson's Transfer Agent to pay to the Trustee, and the Trustee shall collect, within the Exercise Price Transfer Period, a sum (rounded up to the next cent, if fractional) equal to the product of (i) the Exercise Price in effect on the date on which such New Hadson Junior Preferred Shares were exercised, multiplied by (ii) the number of New Hadson Common Shares for which each New Hadson Junior Preferred Share was exercised pursuant to Article 4 Section C.6. of the Charter on the date on which such New Hadson Junior Preferred Shares were exercised, multiplied by (iii) the number of New Hadson Junior Preferred Shares that were exercised to purchase New Hadson Common Shares pursuant to Article 4 Section C.6. of the Charter on the date on which such New Hadson Junior Preferred Shares were exercised. Each such payment shall be accompanied by a report by the Transfer Agent setting forth (x) the date of exercise of each New Hadson Junior Preferred Share with respect to which any payment is made, and (y) each of the items referred to in parts (i), (ii) and (iii) of the foregoing sentence as of the date of exercise. (b) Upon receipt and collection of each payment of Exercise Proceeds pursuant to subsection (a) above, the Trustee shall compute, as of the date of exercise of each New Hadson Junior Preferred Share with respect to which any payment is made (i) the aggregate amount of Exercise Proceeds received by it during the period beginning on the day after the last Measurement Date and ending on such date, and (ii) the number of Exercise Units represented thereby. On each Reporting Date, the Trustee shall determine the sum of all Exercise Units received since the most recent Reporting Date (or the Effective Date if there was no previous Reporting Date) in order to determine whether such Reporting Date is a Classification Date. 4.06 Distributions and Classifications on Classification Dates. Within five (5) business days after each Classification Date: (a) The Trustee shall pay to Prudential the principal amount of all Exercise Proceeds collected since the last Measurement Date. (b) The Trustee shall pay to Hadson the balance of the General Fund (except such amount as the Trustee, in its sole 7 discretion, decides to retain for the payment of expenses, as provided in Section 10.02(b)). (c) The Trustee shall designate and characterize as Classified Shares that number of Unclassified Shares that is equal to the number of Exercise Units distributed to Prudential pursuant to Section 4.06(a) since the last Measurement Date. (d) The Trustee shall distribute the Classified Shares to Hadson. 4.07 Final Distribution. Upon the Termination Date: (a) The Trustee shall distribute to Prudential the balance of Unclassified Shares remaining in the Trust Fund. (b) The Trustee shall distribute to Hadson the balance of the Trust Fund remaining after the distribution (if any) under subsection (a) above (except such amount as the Trustee, in its sole discretion, decides to retain for the payment of expenses, as provided in Section 10.02(b)). ARTICLE V. REPORTS TO THE TRUSTEE AND VERIFICATION OF STOCKHOLDINGS 5.01 Reports by Hadson's Transfer Agent. Hadson shall provide, or shall direct Hadson's Transfer Agent to provide, to the Trustee, together with or prior to delivery of each payment made pursuant to Section 4.05(a), a statement showing (i) the number of New Hadson Junior Preferred Shares that had been exercised to purchase New Hadson Common Shares pursuant to Article 4 Section C.6. of the Charter since the most recent Measurement Date and since the latest Reporting Date, and (ii) the number of New Hadson Junior Preferred Shares issued and outstanding as of the date of such report, as shown on Hadson's Transfer Agent's books and records. 5.02 Securities Law Reports. Hadson shall deliver to the Trustee copies of all periodic reports, proxy statements and other instruments or documents filed by Hadson with the United States Securities and Exchange Commission promptly following such filing. 5.03 Reconciliation of Discrepancies. In the event of any discrepancy between or among the reports obtained by the Trustee pursuant to the preceding provisions of this Article concerning (i) the number of New Hadson Junior Preferred Shares that had been exercised to purchase New Hadson Common Shares pursuant to Article 4 Section C.6. of the Charter, (ii) the number of New Hadson Junior Preferred Shares then remaining outstanding, (iii) the number of New Hadson Common Shares issued upon exercise or 8 conversion of New Hadson Junior Preferred Shares or (iv) such other matters as the Trustee may reasonably request relating to the transactions contemplated hereby, the Trustee shall reconcile such discrepancy in such manner and on the basis of such evidence as the Trustee, in its sole discretion, deems advisable, and shall determine the number of shares so exercised, issued or outstanding, as the case may be. The determination of the Trustee pursuant to the preceding sentence shall be final and binding upon the Beneficiaries. Alternatively, the Trustee may commence a legal action to reconcile such discrepancy, if it deems it advisable to do so. 5.04 Reports by Prudential. (a) Within 10 business days after the Effective Date, Prudential shall provide to the Trustee a statement showing the number of Prudential's New Hadson Common Shares owned as of the Effective Date, as shown on Prudential's books and records. (b) Notwithstanding the provisions of Section 5.03, in making the computation of the quotient described in the definition of "Classification Date" in Section 2.03, the Trustee may rely, absolutely and without further investigation, upon the report provided by Prudential pursuant to this Section, and the Trustee shall not be obligated to inquire into the accuracy of any such Notice or to verify the number of Prudential's New Hadson Common Shares. ARTICLE VI. TAX MATTERS 6.01 Income Tax Status. (a) The Trust is intended to be treated as a grantor trust subject to the provisions of Subchapter J, Subpart E of the Code that is owned by the Beneficiaries, as grantors, as follows: (i) for all federal, state and local income tax purposes, Prudential shall be deemed to be the owner of each Unclassified Share held in the Trust Fund during all or any portion of a taxable year of Prudential, but only for such portion of the taxable year as such Unclassified Share is so characterized under this Trust Agreement; and (ii) for all federal, state and local income tax purposes, Hadson shall be deemed to be the owner of the General Fund and each Classified Share held in the Trust Fund during all or any portion of a taxable year of Hadson, but only, in the case of a Classified Share, for such portion of the taxable year as such Classified Share is so characterized under this Trust Agreement. 9 (b) Any and all items of income, gain, loss, amount realized, deduction or credit attributable to Unclassified Shares during the period they are deemed to be owned by Prudential for tax purposes shall be allocated to Prudential, and all remaining items of income, gain, loss, amount realized, deduction or credit attributable to the Trust Fund shall be allocated to Hadson, provided, however, that the -------- ------- Trustee shall not determine the amount of any income, gain or loss recognized by Prudential in connection with a distribution of Exercise Proceeds to Prudential in exchange for the reclassification of Unclassified Shares pursuant to Section 4.06, it being understood and agreed that Prudential shall be solely responsible for such determination. (c) The Trustee is authorized to take any action consistent with the provisions of this Trust Agreement that may be necessary or appropriate to minimize any potential tax liability of the Beneficiaries arising out of the operations of the Trust. 6.02 Tax Returns and Reports. In accordance with Section 1.671-4(a) of the Treasury Regulations, the Trustee will file with the United States Internal Revenue Service annual information tax returns showing the items of income, loss, amount realized, deduction and credit attributable to the Trust and detailing the allocation of such items to the Beneficiaries, as provided in Section 6.01. The Trustee will send to each Beneficiary a copy of the separate statement containing such information and will instruct each Beneficiary to report such items on its federal income tax return. 6.03 Tax Reporting by Beneficiaries. Each Beneficiary hereby covenants and agrees that it shall file all applicable federal, state and local income tax returns and reports on a basis and in a manner consistent in all material respects with the provisions of Section 6.01, and that each such return or report shall include the items of income, loss, amount realized, deduction and credit set forth in the copy of the income tax reporting statement delivered to such Beneficiary by the Trustee pursuant to Section 6.02. ARTICLE VII. POWERS OF AND LIMITATIONS ON THE TRUSTEE 7.01 Limitations on Trustee. The Trustee shall not at any time, on behalf of the Trust or the Beneficiaries, enter into or engage in any trade or business, and no part of the Trust Fund shall be used or disposed of by the Trustee in furtherance of any trade or business. The Trustee shall be restricted to receiving the Trust's New Hadson Common Shares, voting (or executing consents with respect to) the Trust's New Hadson Common Shares in the manner provided herein, performing any other obligations 10 imposed under or pursuant to any agreements to which the Trustee is subject by virtue of ownership of the Trust's New Hadson Common Shares (including exercising the powers set forth in Section 7.03), receiving the Exercise Proceeds from Hadson or Hadson's Transfer Agent, determining and collecting income from the Trust Fund, collecting, receiving, compromising and settling receivables, discharging, compromising and settling any unascertained, unliquidated or contingent debts, liabilities or obligations for the payment of which any reserve may have been established by the Trustee, disposing of the Trust Fund as provided in Article IV of this Trust Agreement, and bringing suit or defending any suit against the Trust or the Trustee on behalf of the Trust, and exercising such other powers and duties as specified elsewhere in this Trust Agreement, including, without limitation the duties specified in Section 7.03, for the purposes of carrying out the terms of this Trust Agreement. 7.02 Limitations on Investments. The Trustee shall invest the Exercise Proceeds and other funds received by it as Trustee or otherwise held in the Trust Fund only in (a) short-term marketable direct obligations of, or guaranteed as to principal and interest by, the United States government or any agency thereof; or (b) insured demand deposit accounts or interest-bearing certificates of deposit or other similar obligations of domestic banks or other financial institutions having a shareholders' equity or equivalent capital of not less than Fifty Million Dollars ($50,000,000), at the then best generally available rates of interest for like amounts and like periods, provided, however, that the maturities of any of the foregoing shall not exceed one (1) year. 7.03 Specific Powers of Trustee. Subject to the limitations contained in this Trust Agreement, the Trustee shall have, in addition to any powers conferred by any other provision of this Trust Agreement, the power to take any and all actions as, in the sole discretion for the Trustee, are necessary or advisable to effectuate the purpose of the Trust, including the following specific powers: (a) To retain all or any assets constituting part of the Trust Fund, to hold legal title to property of the Trust in the name of the Trust, to invest or reinvest funds of the Trust only as provided in Section 7.02 and to cause such investments of any part to be registered and held in its name, as Trustee, or in the names of nominees. (b) To maintain appropriate books and records relating to the Trust and the Trust Fund detailing the acts and transactions of the Trustee. (c) To initiate, prosecute, defend, supervise, direct, compromise or settle any claim, demand, action or proceeding relating to the Trust or this Trust Agreement, and in 11 connection therewith, at the Trustee's discretion, to retain and employ such agents and professionals (including professionals affiliated with the Trustee or any retained by Hadson or Prudential) and to confer upon them such authority as the Trustee may deem expedient to carry out its duties hereunder, and to pay reasonable compensation therefor from the Trust Fund; provided that the Trustee shall not be required to enter into or maintain any claim, demand, action or proceeding relating to the Trust unless it shall have sufficient funds on hand for that purpose or unless it shall have been indemnified to its satisfaction against all expenses and liabilities to which it may, in its judgment, be subjected by any such action on its part. (d) To perform any and all acts, exercise any and all rights, enter into any and all proceedings, contracts and other instruments (including, but not limited to the preparation and filing of any and all statements and papers, documents and instruments of any kind and nature with the United States Securities and Exchange Commission or any other governmental body having jurisdiction over the Trust or the Merger Agreement with respect to the Trust's New Hadson Common Shares) that are not inconsistent with the provisions of this Trust Agreement and that the Trustee deems necessary and advisable in its opinion for the exercise by the Trustee of all the rights and privileges accorded to it hereunder, for the protection and safekeeping of the Trust's New Hadson Common Shares, and for the administration of the Trust in accordance with the terms of this Trust Agreement and applicable law. ARTICLE VIII. ACCOUNTS OF THE TRUSTEE 8.01 Accounts and Inspection. The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder and all accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by any person designated by Hadson or by Prudential. The Trustee shall promptly deliver to such designee any reports on the Trust Fund that are reasonably requested. 8.02 Accounting Reports. Within a reasonable time period following the Termination Date, and within one hundred twenty (120) days, or such other agreed-upon period, after removal or resignation of the Trustee, the Trustee shall deliver to the Beneficiaries a certified written report, in a format acceptable to the Beneficiaries, setting forth (i) all investments, receipts and disbursements, and other transactions effected during the 12 period from the date of this Trust Agreement, or from the close of any preceding period covered by such a report, to the date of such removal, resignation or termination, (ii) all cash, securities and other property held at the close of such period and the current value thereof, and (iii) such other information as may be required of the Trustee under any applicable law. 8.03 Right to Judicial Accounting. Nothing contained in this Article shall be construed as a limitation upon or prohibition against the Trustee's right to have its accounting judicially settled. 8.04 Preservation of Books and Records. All records and accounts maintained by the Trustee with respect to the Trust shall be preserved for such period as may be required under any applicable law. Upon the expiration of any such required retention period, the Trustee shall have the right to destroy such records and accounts after first notifying the Beneficiaries of its intention and transferring to the Beneficiaries all records and accounts requested. The Trustee shall have the right to preserve all records and accounts in original form, or on microfilm, magnetic tape, or any other similar process. ARTICLE IX. LIABILITIES AND INDEMNIFICATION OF THE TRUSTEE 9.01 Generally. The Trustee accepts and undertakes to discharge the trust created by this Trust Agreement upon the terms and conditions hereof. The Trustee shall exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in its exercise of such rights and powers, as a prudent man would exercise or use under the circumstances in the conduct of its own affairs. No provision of this Trust Agreement shall be construed to relieve the Trustee from liability for its own recklessness or its own intentional or willful and wanton misconduct resulting in private gain, except that: (a) The Trustee shall not be liable for any action taken in good faith in reliance upon the advice of professionals. (b) The Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Trust Agreement, and no implied covenants or obligations shall be read into this Trust Agreement against the Trustee. (c) The Trustee shall not be liable for any error of judgment made in good faith. 13 9.02 Interaction with Prudential Insurance Company on Behalf of its Affiliates. Prudential Insurance Company shall act as sole agent and nominee for itself, Pruco and PruSupply under this Trust Agreement, shall receive all distributions made pursuant to Article IV and shall deliver and receive all Notices required to be delivered hereunder, on behalf of itself, Pruco and PruSupply. The Trustee shall not be required to see to the proper allocation or application of any distribution hereunder among those entities, which shall be the sole responsibility of Prudential Insurance Company. All actions of and Notices furnished by Prudential Insurance Company shall be deemed to have been made by or furnished on behalf of Prudential Insurance Company, Pruco and PruSupply, and the Trustee shall not be required to inquire into the actual authority of Prudential to take such action or furnish such Notice, as the case may be. Notwithstanding the foregoing, Prudential Insurance Company, Pruco and PruSupply shall be jointly and severally liable for all of the responsibilities of Prudential under this Trust Agreement. 9.03 Reliance by Trustee. Except as otherwise provided in Section 7.01: (a) The Trustee may rely and shall be protected in acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order or other paper or document reasonably believed by the Trustee to be genuine and to have been signed or presented by the proper party or parties. (b) The Trustee may consult with legal counsel to be selected by it, and pay the cost of such consultation from the General Fund, and the advice or opinion of such counsel shall be full and complete personal protection to the Trustee and agents of the Trust in respect of any action taken or suffered by it in good faith and in reliance on, or in accordance with, such advice or opinion. 9.04 Indemnification of Trustee. In addition to, and not in limitation of, the provisions of Section 10.02, the Trustee shall be indemnified by and receive reimbursement from Hadson against and from any and all loss, liability, damage or expense that the Trustee may incur or sustain, in good faith and without recklessness or its own intentional or willful and wanton misconduct resulting in personal gain, in the exercise and performance of any of the powers and duties of the Trustee under this Trust Agreement. The Trustee may receive advance payments in connection with indemnification under this Section, provided that prior to receiving any such advance, the Trustee shall first have given a written undertaking to repay any amount advanced to it and to reimburse the Trust or Hadson, as applicable, in the event it is subsequently determined that it is not entitled to such indemnification. The rights accruing to the Trustee by reason of the foregoing shall not be deemed to exclude any other right to which it may legally be entitled, nor shall anything 14 else contained herein restrict the right of the Trustee to contribution under applicable law. 9.05 Advances by Prudential. In the event that Hadson fails to pay to the Trustee any amount requested pursuant to Section 9.04 or Section 10.02, the Trustee shall notify Prudential of such failure and of the amount requested and unpaid, and Prudential may (but need not) advance such amount to the Trustee as a loan to the Trust at such rate of interest and upon such other terms and conditions as the Trustee and Prudential shall agree. All such interest shall be charged as a general administration expense of the Trust. 9.06 Bond of Trustee. Neither the Original Trustee nor any successor Trustee shall be obliged to file or furnish any bond or surety for the performance of its duties, unless otherwise ordered by a Court, and if so ordered, all costs and expenses of providing such bond or surety shall be paid or reimbursed from the General Fund. 9.07 Liability to Third Persons. No Beneficiary shall be subject to any personal liability whatsoever, in tort, contract or otherwise, to any person in connection with the Trust Fund or the affairs of the Trust, and no Trustee or agent of the Trust shall be subject to any personal liability whatsoever, in tort, contract or otherwise, to any person in connection with the Trust Fund or the affairs of the Trust, except for its own recklessness or its own intentional or willful and wanton misconduct resulting in personal gain; and all such persons shall look solely to the Trust Fund for satisfaction of claims of any nature arising in connection with affairs of the Trust. 9.08 Nonliability of Trustee for Acts of Predecessors. Any successor Trustee may accept and rely upon any accounting made by or on behalf of any predecessor Trustee hereunder, and any statement or representation made as to the assets comprising the Trust Fund or as to any other fact bearing upon the prior administration of the Trust. A Trustee shall not be liable for having accepted and relied upon such accounting, statement or representation if it is later proved to be incomplete, inaccurate or untrue. A Trustee or successor Trustee shall not be liable for any act or omission of any predecessor Trustee, nor have a duty to enforce any claims against any predecessor Trustee on account of any such act or omission. 9.09 Nonliability of Trustee for Acts of Others. Nothing contained in this Trust Agreement shall be deemed to be an assumption by the Trustee of any of the liabilities, obligations or duties of any of the other parties hereto, and shall not be deemed to be or contain a covenant or agreement by the Trustee to assume or accept any such liability, obligation or duty. 15 ARTICLE X. COMPENSATION OF TRUSTEE 10.01 Trustee Compensation. Each Trustee shall be entitled to such compensation for services rendered as shall be mutually agreed upon by the Trustee and Hadson prior to such Trustee's accession to office, to be paid in such installments and at such intervals as shall have been specified in such agreement. 10.02 Advances for Expenses. (a) Hadson shall pay to the Trustee such amounts as the Trustee shall request from time to time to enable the Trustee to satisfy all reasonable expenses (except those resulting from its own recklessness or its own intentional or willful and wanton misconduct resulting in private gain) incurred by the Trustee as a result of the execution of its duties hereunder, including, but not limited to, legal and accounting expenses, expenses incurred or anticipated as a result of disbursements and payments made or to be made by the Trustee, and reasonable compensation for agents, counsel or other services rendered to the Trustee by third parties, and expenses incident thereto, including taxes of any kind whatsoever, and related interest and penalties, that may be levied or assessed under existing or future laws of any jurisdiction upon or in respect of the Trust or the Trust's New Hadson Common Shares. All amounts received by the Trustee pursuant to this Section shall be added to the General Fund. (b) In lieu of requesting funds for the payment of anticipated expenses, as provided in subsection (a) above, the Trustee may retain as much or all of the General Fund that would otherwise be payable to Hadson pursuant to Section 4.04(b) as the Trustee, in its sole and absolute discretion shall deem advisable as a reserve for the payment of such expenses. 10.03 Prior Lien of Trustee. The Trustee shall have a prior lien upon the Trust Fund to secure payment of any amounts payable to the Trustee or to employees or agents of the Trust as compensation for services to the Trust or for indemnification pursuant to Section 9.04 above. ARTICLE XI. TRUSTEE AND SUCCESSOR TRUSTEES 11.01 Generally. The Trustee shall be a bank or trust company authorized to act as a corporate fiduciary under the laws of the State of New York or a national banking association chartered under the laws of the United States. A Trustee that changes its name or reorganizes, reincorporates or merges with or into or consolidates with any other entity shall be deemed to be 16 a continuing entity and shall continue to act as a Trustee hereunder. 11.02 Initial Appointment of Trustee. The Trustee shall be initially appointed by Hadson. 11.03 Resignation. The Trustee may resign as Trustee by delivering a Notice of resignation to Hadson. Such resignation shall become effective on the day specified in such Notice (which shall not be less than thirty (30) days after delivery of such Notice) or upon the appointment of such Trustee's successor and such successor's acceptance of such appointment, whichever is later. 11.04 Appointment of Successor. In the event of the removal, resignation, bankruptcy or insolvency of the Trustee, a vacancy shall be deemed to exist and a successor shall be appointed by Hadson. 11.05 Acceptance of Appointment by Successor Trustee. The removal, resignation, bankruptcy or insolvency of the Trustee shall not operate to terminate the Trust created by this Trust Agreement or to revoke any existing agency created pursuant to the terms of this Trust Agreement or invalidate any action theretofore taken by the Trustee. Any successor Trustee appointed hereunder shall execute an instrument accepting its appointment and shall deliver one counterpart thereof to each of the Beneficiaries, and, in case of the Trustee's resignation, to the retiring Trustee. Thereupon such successor shall, without any further act, become vested with all the liabilities, duties, powers, rights, title, discretion and privileges of its predecessor in the Trust with like effect as if originally named Trustee. The retiring Trustee shall duly assign, transfer and deliver to such successor all property and money held by such retiring Trustee hereunder and shall, as reasonably requested by such successor, execute and deliver an instrument or instruments conveying and transferring to such successor upon the trust herein expressed, all the liabilities, duties, powers, rights, title, discretion and privileges of such retiring Trustee. ARTICLE XII. AMENDMENTS 12.01 Amendment Authority. Whenever necessary to carry out the purpose of the Trust, this Trust Agreement may be amended by the Trustee with the unanimous consent and approval of the Beneficiaries; provided, however, that no such amendment may be made that would have the effect of (i) extending the Termination Date beyond the date specified in Section 3.02, (ii) authorizing the Trustee to engage in a trade or business, or (iii) expanding the amendment powers of the Trustee under this Article. 17 ARTICLE XIII. MISCELLANEOUS PROVISIONS 13.01 Intention of Parties to Establish Trust. This Trust Agreement is intended to create a trust without transferable beneficial interests (except as permitted by operation of law) and the Trust created hereunder shall be governed and construed in all respects as a trust. 13.02 Instruments of Further Assurance. Hadson and Prudential shall, upon the reasonable request of the Trustee, execute, acknowledge and deliver such further instruments and do such further acts as may be necessary or proper to carry out effectively the purpose of this Trust Agreement. 13.03 Governing Law. This Trust Agreement shall be construed and enforced according to the internal laws of the State of Oklahoma and all provisions hereof shall be administered according to the laws of the State of Oklahoma. 13.04 Severability. In the event any provision of this Trust Agreement or the application thereof to any person or circumstances shall be finally determined by a court of proper jurisdiction to be invalid or unenforceable to any extent, the remainder of this Trust Agreement, or the application of such provision to persons or circumstances or in jurisdictions other than those as to or in which it is held invalid or unenforceable, shall not be affected thereby, and each provision of this Trust Agreement shall be valid and enforced to the fullest extent permitted by law. 13.05 Notices. (a) Any Notice or other communication required or permitted to be made in accordance with this Trust Agreement shall be in writing and shall be deemed to have been sufficiently given, for all purposes, if delivered personally, or if delivered during regular business hours by facsimile transmission, telex or other electronic or telegraphic means, or if delivered by a recognized overnight or two- day delivery service or if mailed by first class mail: (i) if to the Trustee at Liberty Bank and Trust Company of Oklahoma City, N.A., 100 North Broadway, Liberty Tower, Seventh Floor, Oklahoma City, Oklahoma 73102, Attention: John Brown, Trust Department. Facsimile number: (405) 231-6293. (ii) if to any Beneficiary, to the last known business address of such Beneficiary reflected in the Trustee's records. 18 (b) Any entity may change the address at which it is to receive Notices under this Trust Agreement by furnishing written Notice thereof to the Trustee as provided above. 13.06 Counterparts. This Trust Agreement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. 13.07 Effective Date. This Trust Agreement shall become effective immediately after the filing of the Certificate of Merger with respect to the Merger with the Secretary of State of the State of Delaware. 19 IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement or caused this Trust Agreement to be duly executed by their respective officers and the Trustee herein has executed this Trust Agreement, as Trustee, effective as of the day and year first above written. ATTEST: HADSON CORPORATION By:________________ By:____________________________________ ATTEST: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By:_________________ By:____________________________________ ATTEST: PRUCO LIFE INSURANCE COMPANY By:_________________ By:____________________________________ ATTEST: PRUSUPPLY INC. By:_________________ By:____________________________________ ATTEST: LIBERTY BANK AND TRUST COMPANY OF OKLAHOMA CITY, N.A. By:_________________ By:____________________________________ 20 STATE OF OKLAHOMA ) ) ss: COUNTY OF ) ------- Before me, the undersigned, a Notary Public in and for said County and State on this day of , 19 , personally ---- ------------- -- appeared to me known to be the identical --------------------------- person who subscribed the name of the maker thereof to the foregoing instrument as its President and acknowledged to me that executed the same as his free and voluntary act and -------------- deed and as the free and voluntary act and deed of such corporation, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. My commission expires ------------- -------------------------- Notary Public STATE OF NEW JERSEY ) ) ss: COUNTY OF ) ------- Before me, the undersigned, a Notary Public in and for said County and State on this day of , 19 , personally ---- ------------ -- appeared to me known to be the identical person who --------------- subscribed the name of the maker thereof to the foregoing instrument as its President and acknowledged to me that ------ ------------- executed the same as his free and voluntary act and deed and as the free and voluntary act and deed of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. My commission expires ------------- -------------------------- Notary Public 21 STATE OF NEW JERSEY ) ) ss: COUNTY OF ) ------- Before me, the undersigned, a Notary Public in and for said County and State on this day of , 19 , personally ---- ------------ -- appeared to me known to be the identical person who ----------------- subscribed the name of the maker thereof to the foregoing instrument as its President and acknowledged to me that ------- ---------------- executed the same as his free and voluntary act and deed and as the free and voluntary act and deed of PRUCO LIFE INSURANCE COMPANY for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. My commission expires ------------- -------------------------- Notary Public STATE OF NEW JERSEY ) ) ss: COUNTY OF ) ------- Before me, the undersigned, a Notary Public in and for said County and State on this day of , 19 , personally ---- ------------ -- appeared to me known to be the identical person who ----------------- subscribed the name of the maker thereof to the foregoing instrument as its President and acknowledged to me that ------- ---------------- executed the same as his free and voluntary act and deed and as the free and voluntary act and deed of PRUSUPPLY, INC., for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. My commission expires ------------- -------------------------- Notary Public 22 EX-2 3 VOTING AGREEMENT VOTING AGREEMENT This Agreement, dated the 14th day of December, 1993, is by and among SANTA FE ENERGY RESOURCES, INC., a Delaware corporation with its executive offices located at 1616 South Voss Road, Suite No. 1000, Houston, Texas 77057 ("SFER"), SFER PIPELINE, INC., a Delaware corporation and a wholly-owned subsidiary of SFER ("Pipeline"), and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey mutual insurance company with its executive offices located at 100 Mulberry Street, Newark, New Jersey 07102 ("Prudential Insurance"), PRUCO LIFE INSURANCE COMPANY, an Arizona corporation ("Pruco"), and PRUSUPPLY, INC., a Delaware corporation ("PruSupply" and, together with Prudential Insurance and Pruco, being collectively referred to herein as "Prudential"). R E C I T A L S: --------------- WHEREAS, pursuant to that certain Agreement of Merger (the "Merger Agreement"), dated as of July 28, 1993, as amended, among Hadson Corporation ("Hadson"), SFER and Adobe Gas Pipeline Company, a wholly-owned subsidiary of Pipeline ("AGPC"), AGPC will be merged (the "Merger") with and into Hadson, and, pursuant to the Merger Agreement, Hadson will issue to Pipeline and Prudential (in addition to the other stockholders of Hadson) the number of shares of common stock, par value $0.01 per share, of Hadson (the "New Hadson Common Stock") specified in Section 2.7 of the Merger Agreement; and WHEREAS, as result of the Merger, Prudential will, among other things, receive the right to receive 97.27% of a beneficial interest in a trust (the "HP Trust") which will contain 4,983,180 shares of New Hadson Common Stock (the "Trust Shares") in exchange for its existing Class B Common Stock, approximately 756,104 shares of New Hadson Common Stock in exchange for its existing Class C Common Stock; 20,001 shares of New Hadson Common Stock in exchange for 300,000 shares of existing Hadson Common Stock; approximately 553,686 additional shares of New Hadson Common Stock, and the right to receive the remaining 2.73% of a beneficial interest in the HP Trust; and certain other consideration in exchange for its 7% Senior Cumulative Preferred Stock of Hadson; and WHEREAS, immediately upon the consummation of the Merger, Hadson will deposit the Trust Shares into the H/P Trust, a trust of which Prudential will be a beneficiary and Prudential will be entitled to direct the voting of certain of the Trust Shares; and WHEREAS, immediately upon the consummation of the Merger, the total number of members of the whole Board of Directors of Hadson (the "Board of Directors") will consist of eight persons divided into three classes, seven of such positions to be filled immediately after the Merger and the remaining position to be vacant pending selection by the Board of Directors of a Chief Executive Officer of Hadson, who is expected to fill such vacancy; and WHEREAS, in connection with the Merger each of SFER, Pipeline and Prudential have agreed, on the terms and subject to the conditions set forth herein, to vote for and to grant to the other party a proxy to vote the shares of New Hadson Common Stock held by them for certain nominees to the Board of Directors, all as more fully set forth in this Agreement; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. ELECTION OF DIRECTORS (a) During the term of this Agreement (as set forth in Section 5 hereof), at any time when one or more directors of Hadson are to be elected by stockholders, SFER will be entitled to designate, by written notice to Prudential, for election to Hadson's Board of Directors at such special or annual meeting of stockholders at which such directors are to be elected by the holders of shares of New Hadson Common Stock, or for election by written consent of such holders, to Hadson's Board of Directors, such number of persons as is necessary so that, after giving effect to the election of such person(s), all persons designated by SFER for election to Hadson's Board of Directors will represent fifty percent (50%) of the total number of persons constituting the whole Board of Directors immediately after such election, such designation to be effected in such a manner as to provide, subject to the terms of Hadson's certificate of incorporation and bylaws, as then amended and in effect, that at least one person designated by SFER pursuant to this Section 1(a) will be designated to serve as a member of each class of directors of the Board of Directors. (b) During the term of this Agreement, at any time when one or more directors of Hadson are to be elected by 2 stockholders, Prudential will be entitled to designate by written notice to SFER, for election to Hadson's Board of Directors at such special or annual meeting of stockholders at which such directors are to be elected by the holders of shares of New Hadson Common Stock, or for election by written consent of such holders, to Hadson's Board of Directors, one person to serve as a member of Hadson's Board of Directors, such designation to be effected in such a manner as to provide that after giving effect to the election of such person, one person (and only one person) designated by Prudential for election to Hadson's Board of Directors will, subject to the terms of Hadson's certificate of incorporation and by-laws, as then amended and in effect, be a member of Hadson's Board of Directors serving in Class I of such Board. (c) Until the first to occur of (i) the date of the Annual Meeting of Stockholders of Hadson to be held in 1996 (the "1996 Annual Meeting"), (ii) the inability of Prudential and SFER, despite their respective reasonable best efforts in good faith, to agree upon a designee to fill a vacancy in the Hadson Board of Directors caused by the death, disability, retirement, resignation or removal of J. Michael Adcock (or a person theretofore designated pursuant to this Section 1(c) as a successor to Mr. Adcock (a "Successor")) prior to the 1996 Annual Meeting, and (iii) the termination of this Agreement, if at any time prior to the 1996 Annual Meeting a vacancy shall exist in Hadson's Board of Directors, which vacancy is caused by the death, disability, retirement, resignation or removal of Mr. Adcock or any Successor, Prudential and SFER will be entitled to jointly designate, by written notice acknowledged by both Prudential and SFER, for election to Hadson's Board of Directors at any special or annual meeting of stockholders at which directors are to be elected by the holders of New Hadson Common Stock, or for election by written consent in lieu of a meeting, which special or annual meeting or written consent is effective prior to the 1996 Annual Meeting, one person to serve as a member of Hadson's Board of Directors to fill such vacancy as a member of Class III of Hadson's Board of Directors until the 1996 Annual Meeting. The designation by Prudential and SFER in accordance with the preceding sentence shall be effected in such a manner as to provide, subject to Hadson's restated certificate of incorporation and bylaws, as then amended and in effect, that after giving effect to the election of such person, one person designated jointly by Prudential and SFER for election to Hadson's Board of Directors will be designated as a Class III member of Hadson's Board of Directors until the 1996 Annual Meeting (Prudential and SFER acknowledge that, upon consummation of the Merger, Mr. Adcock will constitute such a joint designee 3 for purposes of this Section 1(c)). Notwithstanding the foregoing, Prudential and SFER acknowledge and agree that if a vacancy in Hadson's Board of Directors occurs prior to the 1996 Annual Meeting by reason of the death, disability, retirement, resignation or removal of Mr. Adcock (or a Successor) and if, despite the reasonable best efforts in good faith of Prudential and SFER, Prudential and SFER are unable within 45 days after such vacancy first occurs to jointly agree upon a Successor designee, each of Prudential and SFER shall be free to vote their respective shares of New Hadson Common Stock in favor of the person of their choice to fill such vacancy. (d) Each of SFER, Pipeline and Prudential agrees to vote the shares of New Hadson Common Stock held by it or by any of its Affiliates to call and attend any and all annual and special meetings of the Hadson stockholders at which directors are to be elected and to vote their respective shares of New Hadson Common Stock at such meeting or to execute and deliver written consents in connection with the election of directors by written consent of stockholders in lieu of a meeting in such a manner as to (i) elect its own designee(s) to the Board of Directors of Hadson as are designated in accordance with this Agreement, (ii) elect the designee(s) to the Board of Directors of Hadson of the other party hereto as are designated in accordance with this Agreement, and (iii) to elect any joint designee to the Board of Directors of Hadson as may be mutually agreed upon by SFER and Prudential pursuant to Section 1(c) hereof. SFER and Prudential will each cause the persons designated by it for election for the Board of Directors to timely provide to Hadson such information as is required in order to enable Hadson to fulfill its obligations pursuant to applicable requirements of the U.S. Federal securities laws. (e) Notwithstanding anything in this Agreement to the contrary, SFER, Pipeline and Prudential each expressly acknowledge that it is the intention of the parties hereto that this Agreement will become effective, and the parties will each take any and all necessary actions, so that the composition of the Board of Directors will be as contemplated by this Section 1 immediately following the consummation of the Merger. 2. VACANCIES If, as a result of death, disability, retirement, resignation, removal or otherwise there shall exist or occur any vacancy in any directorship on the Board of Directors which SFER or Prudential is individually, or which SFER and Prudential acting jointly, are entitled to designate under Section 1 above 4 each party hereto agrees to use its reasonable best efforts to cause the remaining members of the Board of Directors to fill such vacancy with a candidate designated by SFER or Prudential by written notice to the other party or, in the case of a joint director designated in accordance with Section 1(c), by written notice acknowledged by both Prudential and SFER, as the case may be, so as to restore the composition of the Board of Directors to that contemplated by Section 1 above as promptly as practicable (provided, however, that any former director who was removed from office shall not thereafter be designated a director by either SFER or Prudential). Notwithstanding the foregoing, if the Board of Directors fails to fill such vacancy within five business days after being advised by SFER or Prudential or both such parties, as the case may be, of the designee for such vacancy, then each of SFER, Pipeline and Prudential agrees to take such action, including, without limitation, executing written consents or calling and voting at a special meeting of stockholders, as may reasonably be necessary to restore the composition of the Board of Directors to that contemplated by Section 1 above as promptly as practicable, but in no event later than 60 days (subject to applicable U.S. federal securities laws). 3. ADDITIONAL OBLIGATIONS OF SFER AND PRUDENTIAL During the term of this Agreement, Prudential and SFER shall use their respective reasonable best efforts to assure that the total number of directors constituting Hadson's whole Board of Directors remains an even number and is never less than six. 4. LIMITED IRREVOCABLE PROXIES (a) SFER and Pipeline, jointly and severally, hereby irrevocably designate and appoint Prudential, for and on behalf of SFER and Pipeline and in each of their names, places and stead, as each of their true and lawful proxy and attorney-in-fact to call any special meetings of Hadson's stockholders and to attend any and all annual and special meetings of the Hadson stockholders at which directors are to be elected and to vote, or to act by written consent in lieu of a vote or meeting, any and all shares of New Hadson Common Stock that SFER or Pipeline may own during the term of this Agreement (i) in such a manner as to cause the person designated by Prudential in accordance with Section 1(b) hereof and any person jointly designated by Prudential and SFER in accordance with Section 1(c) hereof, to be elected as members of Hadson's Board of Directors, (ii) against any amendment to Section 3.03 of the bylaws of Hadson in accordance with Article 7 of Hadson's restated certificate of incorporation as in effect immediately following the Merger and 5 against any proposed amendment to Article 7 of Hadson's restated certificate of incorporation, and (iii) to call a special meeting of stockholders if reasonably necessary under Section 2 hereof; provided, however, that the foregoing designation by SFER and Pipeline of Prudential as their attorney-in-fact and proxy is solely for the limited purposes of permitting Prudential to vote, or to act by written consent in lieu of a vote or meeting, such shares of New Hadson Common Stock in favor of the election of Prudential's designee to Hadson's Board of Directors as contemplated in Section 1(b) hereof and the person jointly designated by Prudential and SFER in accordance with Section 1(c) hereof, to vote, or to act by written consent in lieu of a vote or meeting, such shares against any amendment to Section 3.03 of the bylaws and any proposed amendment to Article 7 of the restated certificate of incorporation and to call a special meeting of the stockholders if reasonably necessary under Section 2 hereof, and may be exercised or otherwise utilized by Prudential at any meeting of Hadson's stockholders (or by written consent in lieu of a meeting) only if SFER or Pipeline fails or refuses to vote its shares of New Hadson Common Stock at such meeting, or to act by written consent in lieu of a vote or meeting, with respect to the matters for which proxies are granted hereunder. (b) Prudential hereby irrevocably designates and appoints SFER, for and on behalf of Prudential and in its name, place and stead, as Prudential's true and lawful proxy and attorney-in-fact to call any special meetings of Hadson's stockholders and to attend any and all annual and special meetings of the Hadson stockholders at which directors are to be elected and to vote (or in the case of any Trust Shares in which Prudential has a beneficial interest, to direct the trustee to vote such shares), or to act by written consent in lieu of a vote or meeting, any and all shares of New Hadson Common Stock that Prudential may own during the term of this Agreement, (i) in such a manner as to cause the persons designated by SFER in accordance with Section 1(a) hereof and the person jointly designated by Prudential and SFER in accordance with Section 1(c) hereof, to be elected as members of Hadson's Board of Directors, (ii) against any amendment to Section 3.03 of the bylaws of Hadson in accordance with Article 7 of Hadson's restated certificate of incorporation as in effect immediately following the Merger and against any proposed amendment to Article 7 of Hadson's restated certificate of incorporation, and (iii) to call a special meeting of stockholders, if reasonably necessary, under Section 2 hereof; provided, however, that the foregoing designation by Prudential of SFER as Prudential's attorney-in-fact and proxy is solely for the limited purposes of permitting SFER to vote, or to act by 6 written consent in lieu of a vote or meeting, such shares of New Hadson Common Stock in favor of the election of its designees to Hadson's Board of Directors as contemplated in Section 1(a) hereof and the person jointly designated by Prudential and SFER in accordance with Section 1(c) hereof, to vote, or to act by written consent in lieu of a vote or meeting, such shares against any amendment to Section 3.03 of the bylaws and any proposed amendment to Article 7 of the restated certificate of incorporation and to call a special meeting of the stockholders if reasonably necessary under Section 2 hereof, and may be exercised or otherwise utilized by SFER at any meeting of Hadson's stockholders (or by written consent in lieu of a meeting), only if Prudential fails or refuses to vote (or to direct the trustee under the Trust Agreement to vote) its shares of New Hadson Common Stock at such meeting, or to act by written consent in lieu of a vote or meeting, with respect to the matters for which proxies are granted hereunder. (c) Notwithstanding the terms of Sections 4(a) and (b) hereof, SFER, Pipeline and Prudential shall each be free at any time and from time to time to sell, transfer or otherwise dispose of any and all shares of New Hadson Common Stock that such person may own, and agree that the trustee may classify Trust Shares and may transfer and deliver Trust Shares to Prudential upon termination of the Trust, and to Hadson for cancellation, each in accordance with the Trust Agreement, and, upon any and each such sale, transfer or disposition (other than any sale, transfer or disposition to an Affiliate (as defined below) of SFER, Pipeline or Prudential, as the case may be), the proxy granted pursuant to Section 4(a) or (b) hereof in respect of the shares of New Hadson Common Stock so sold, transferred or otherwise disposed of shall terminate. For purposes hereof, Affiliate shall mean, with respect to a specified person, any person that directly or indirectly through one or more intermediaries, controls or is controlled by or under common control with the person specified. In furtherance of the foregoing, each of Pipeline, SFER and Prudential agrees not to transfer any shares of New Hadson Common Stock to an Affiliate unless the Affiliate becomes a party to this Agreement. (d) The proxies granted pursuant to Sections 4(a) and (b) hereof are personal and may not be transferred or assigned, in whole or in part (by operation of law or otherwise) to any other person or persons without the prior written consent of the party granting such proxy, except to an Affiliate of the party receiving such proxy. 7 (e) Each of SFER and Pipeline represents and warrants to Prudential that (i) each of SFER and Pipeline has duly authorized, executed and delivered this Agreement and this Agreement constitutes a valid and binding agreement, enforceable against it in accordance with its terms, and neither the execution and delivery of this Agreement nor the performance by SFER or Pipeline of the transactions contemplated hereby will constitute a violation of, a default under, or conflict with any contract, commitment, agreement, understanding, arrangement or restriction of any kind to which SFER or Pipeline is a party or by which SFER or Pipeline is bound; (ii) consummation by each of SFER and Pipeline of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under any provision of law other than a filing on Form 13D or Form 13G or any other form that may be required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (iii) upon consummation of the Merger, each of SFER and Pipeline will have the power and right to vote all of the shares of New Hadson Common Stock that it will receive upon consummation of the Merger as contemplated herein. (f) Prudential represents and warrants to SFER and Pipeline that (i) Prudential has duly authorized, executed and delivered this Agreement and this Agreement constitutes a valid and binding agreement, enforceable against it in accordance with its terms, and neither the execution and delivery of this Agreement nor the performance by Prudential of the transactions contemplated hereby will constitute a violation of, a default under, or conflict with any contract, commitment, agreement, understanding, arrangement or restriction of any kind to which Prudential is a party or by which Prudential is bound; (ii) consummation by Prudential of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under any provision of law other than a filing on Form 13D or Form 13G or any other form that may be required under the Exchange Act; and (iii) upon consummation of the Merger, Prudential will have the power and right to vote all of the shares of New Hadson Common Stock that it will receive upon consummation of the Merger, and will have the power and right to direct the Trustee to vote the Trust Shares with respect to which Prudential is the beneficial owner. (g) SFER, PIPELINE AND PRUDENTIAL EACH AGREES THAT THE PROXIES AND ALL OTHER POWER AND AUTHORITY INTENDED TO BE CONFERRED PURSUANT TO SECTIONS 4(a) AND (b) HEREOF HEREBY ARE IN EACH CASE COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE GRANT AND POWER, AND THEREFORE ARE IRREVOCABLE. 8 5. TERM This Agreement shall be effective immediately upon consummation of the Merger (the date thereof, the "Effective Date"), and continue for a term of 10 years, provided that this Agreement shall earlier terminate at such time as Prudential no longer beneficially owns (as defined in Rule 13d-3 under the Exchange Act) at least 756,100 shares of the New Hadson Common Stock. 6. SPECIFIC PERFORMANCE Each of SFER, Pipeline and Prudential acknowledges that: (a) the actions to be taken by it under the provisions of this Agreement are of a special character; (b) such actions are impossible or impracticable to replace; (c) the other parties to this Agreement may be damaged if the provisions hereof are not specifically enforced; and (d) the award of monetary damages may not adequately protect any party in the event of a breach hereof by any other party or parties. By virtue thereof, each of SFER, Pipeline and Prudential agrees and consents that if it breaches any of the provisions of this Agreement, the injured party or parties, in addition to any other rights and remedies available under this Agreement or otherwise, shall (without any bond or other security being required and without the necessity of proving monetary damages) be entitled to a temporary and/or permanent injunction to be issued by a court of competent jurisdiction restraining the breaching party from committing or continuing any violation of this Agreement, or any other appropriate decree of specific performance. Such remedies shall not be exclusive and shall be in addition to any other remedy which any of them may have. 7. MISCELLANEOUS (a) Governing Law. Except to the extent that the matters ------------- set forth herein are governed by the Delaware General Corporation Law (the "Delaware Act"), in which case such matters shall be governed by and construed in accordance with the 9 Delaware Act, this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles governing conflicts of law. (b) Amendment; Termination. This Agreement cannot be ---------------------- amended or terminated orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, amendment, modification or discharge is sought. (c) Execution in Counterparts. This Agreement may be ------------------------- signed in one or more counterparts, each of which shall be an original, but all of which together shall constitute one instrument. (d) Severability. If any term, provision, covenant or ------------ restriction of this Agreement, or the application thereof to any circumstance shall, to any extent, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement or the application thereof to any other circumstance, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law. (e) Notices. All communications provided for herein shall ------- be in writing, and shall be addressed to the relevant party at the following addresses: (i) if to SFER or Pipeline, at: Santa Fe Energy Resources, Inc. 1616 South Voss Road Suite No. 1000 Houston, Texas 77057 Attn: Senior Vice President/General Counsel Fax No.: (713) 268-5341 (ii) if to Prudential, at: Prudential Capital Group 100 Mulberry Street Gateway Center 4, 10th Floor Newark, New Jersey 07102 Attn: Joseph Y. Alouf Vice President Fax No.: (201) 802-2333 cc: Jack L. Pfeilsticker 10 (f) Entire Agreement; Headings. This Agreement embodies -------------------------- the entire agreement and understanding among the parties relating to the subject matter hereof and supersedes all prior agreements and understanding relating to the subject matter hereof. The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SANTA FE ENERGY RESOURCES, INC. By: /s/ J.L. Payne -------------------------- Name: J.L. Payne Title: President SFER PIPELINE, INC. By: /s/ J.L. Payne -------------------------- Name: J.L. Payne Title: President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ David Descalzi -------------------------- Name: David Descalzi Title: Vice President PRUCO LIFE INSURANCE COMPANY By: /s/ David Descalzi -------------------------- Name: David Descalzi Title: Vice President 11 PRUSUPPLY, INC. By: /s/ Judith Somerstein -------------------------- Name: Judith Somerstein Title: Vice President 12 EX-3 4 REGISTRATION RTS AGREEMENT REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of December 14, 1993, among The Prudential Insurance Company of America, PruSupply, Inc. and Pruco Life Insurance Company (collectively, "Prudential", and each individually, a "Prudential Entity"), Santa Fe Energy Resources, Inc., a Delaware corporation ("Santa Fe"), Hadson Corporation, a Delaware corporation (the "Company"), and SFER Pipe-Line, Inc., a Delaware corporation ("Pipeline," and collectively with Santa Fe, "SFER"). 1. Background. This Agreement is made pursuant to (i) the ---------- Agreement of Merger dated as of July 28, 1993 among SFER, Adobe Gas Pipeline Company, a Delaware corporation and a wholly owned subsidiary of SFER, and the Company (as amended, the "Merger Agreement") and (ii) the Securities Purchase Agreement of even date herewith by and among the Company and each Prudential Entity (the "Purchase Agreement"). Pursuant to the Merger Agreement, upon consummation of the Merger (as defined therein), the Company shall issue to SFER 2,080,000 shares of Senior Cumulative Preferred Stock, Series A, par value $0.01 per share (the "Senior Preferred Stock") and a number of shares of new Common Stock, par value $0.01 per share, of the Company (the "New Common Stock"), as is equal to approximately 40% of the total number of shares of New Common Stock outstanding after giving effect to the Merger. Prudential holds all of the existing shares of the Company's Class B Common Stock, par value $.01 per share, the Company's Class C Common Stock, par value $.01 per share and the Company's 7% Senior Cumulative Preferred Stock (respectively, the "Existing Class B Common Stock", the "Existing Class C Common Stock" and the "Existing Senior Preferred Stock"). Prudential also holds 300,000 shares of the Company's existing Common Stock, par value $.01 per share (the "Old Common Stock"). As a result of the Merger, Prudential will receive the right to receive 97.27% of a beneficial interest in a trust (the "H/P Trust") containing 4,983,180 shares of New Common Stock (such shares, the "Trust Shares") in exchange for its Existing Class B Common Stock; approximately 756,104 shares of New Common Stock in exchange for its Existing Class C Common Stock; and approximately 553,658 shares of New Common Stock, the right to receive the remaining 2.73% of a beneficial interest in the H/P Trust, and $33 million aggregate principal amount of new 8% Senior Secured Notes of the Company in exchange for its Existing Senior Preferred Stock; and will receive 20,001 shares of New Common Stock and certain shares of Junior Exercisable Automatically Convertible Preferred Stock, Series B, par value $.01 per share (the "Junior Preferred Stock"), in exchange for its 300,000 shares of Old Common Stock. As a material part of the inducement to SFER to enter into the Merger Agreement, and to each Prudential Entity to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. This Agreement shall become effective upon the occurrence of both (a) the issuance of the shares of Senior Preferred Stock and New Common Stock to SFER pursuant to the Merger Agreement and (b) the issuance of the New Common Stock and other Merger consideration to each Prudential Entity pursuant to the Merger. 2. Registration under Securities Act, etc. -------------------------------------- 2.1. Registration on Request. (a) Upon the written request ----------------------- of SFER or any one or more of the Prudential Entities (this and other defined terms have the meanings specified in Section 3 hereof), requesting that the Company effect the registration under the Securities Act of all or part of Registrable Securities held by them and specifying the intended method of disposition thereof and whether or not such requested registration is to be an underwritten offering, the Company will promptly give written notice of such requested registration to all other holders of Registrable Securities and thereupon the Company will use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been so requested to register by such holders, and (ii) all additional Registrable Securities which the Company has been requested to register by the holders thereof by written request given to the Company within 30 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registrable Securities), all to the extent required to permit the disposition (in accordance with the intended methods thereof) of the Registrable Securities so to be registered; provided, however, that: (A) Prudential (including for -------- ------- this purpose, any assignee of all Registrable Securities owned by any Prudential Entity) shall be entitled to request such registration of its New Common Stock only once in any twelve month period, SFER (or any assignee of all Registrable Securities of any class or series owned by SFER) shall be entitled to request such registration of its New Common Stock only once in any twelve month period, and SFER (or any assignee of all Registrable Securities of any class or series owned by SFER) shall be entitled to request such registration of its Senior Preferred Stock only once in any twelve month period and (B) with respect to any registration statement filed, or to 2 be filed, pursuant to this Section 2.1, if the Board of Directors of the Company determines, in its good faith judgment, that the registration of such Registrable Securities would materially and adversely impact any material financing activity (the "Disadvantageous Condition"), notwithstanding any other provision of this Section 2.1, upon the giving of a written notice to such effect to holders of Registrable Securities, the Company (1) in the event that the registration statement has been filed, shall be entitled to cause such registration statement to be withdrawn and shall be entitled to not file a substitute registration statement and (2) in the event no registration statement has yet been filed, shall be entitled to not file any such registration statement, in either case until the earlier of (the "Resumption Date") (i) the expiration of a reasonable period not to exceed 120 days or (ii) the date on which the Board of Directors of the Company determines the Disadvantageous Condition no longer exists. The Company shall promptly deliver written notice of the Resumption Date to each holder of the Registrable Securities. If, as a result of a Disadvantageous Condition, a registration statement was withdrawn or was not filed, the Company shall use its best efforts to effect the registration under the Securities Act, as promptly as reasonably practicable after the Resumption Date, of the Registrable Securities included or to be included in such registration statement, unless the holder requesting such registration by written notice (a "Withdrawal Notice") to the Company requests that the Company not effect such registration. If a holder delivers a Withdrawal Notice to the Company, the holder's original request for registration of its Registrable Securities (which was delayed as a result of the existence of a Disadvantageous Condition) shall not be included in determining --- whether a request for registration has been given in any twelve month period. (b) Registration of Other Securities. Whenever the Company -------------------------------- shall effect a registration pursuant to this Section 2.1 in connection with an underwritten offering by one or more holders of Registrable Securities, no securities other than Registrable Securities shall be included among the securities covered by such registration unless (a) the managing underwriter of such offering shall have advised each holder of Registrable Securities to be covered by such registration in writing that the inclusion of such other securities would not adversely affect such offering and (b) the holders of all Registrable Securities to be covered by such registration shall have consented in writing to the inclusion of such other securities. (c) Registration Statement Form. Registrations under this --------------------------- Section 2.1 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Company and as shall be reasonably acceptable to each holder of the Registrable Securities requested to be included in such registration and (ii) as shall permit the disposition of such Registrable Securities in 3 accordance with the intended method or methods of disposition specified in their request for such registration. The Company agrees to include in any such registration statement all information which holders of Registrable Securities being registered shall reasonably request. (d) Expenses. The Company will pay all Registration -------- Expenses in connection with (i) the first two registrations of Senior Preferred Stock by SFER, (ii) the first two registrations of New Common Stock requested by SFER, and (iii) the first two registrations of New Common Stock requested by Prudential, pursuant to Section 2.1(a). The Registration Expenses (and underwriting discounts and commissions and transfer taxes, if any) in connection with each other registration requested under this Section 2.1 shall be allocated among all Persons on whose behalf securities of the Company are included in such registration, on the basis of the respective amounts of the securities then being registered on their behalf. (e) Effective Registration Statement. A registration -------------------------------- requested pursuant to this Section 2.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, (iii) if, after it has become effective, such registration does not remain effective for 120 days or such lesser time period sufficient to permit the sale of the Registrable Securities registered thereby in accordance with the intended method of distribution, or (iv) if the conditions to closing specified in the purchase agreement or underwriting agreement entered into in con- nection with such registration are not satisfied or waived. (f) Selection of Underwriters. If a requested registration ------------------------- pursuant to this Section 2.1 involves an underwritten offering, the underwriter or underwriters thereof shall be selected by the Company and shall be reasonably acceptable to each holder of Registrable Securities to be so registered. (g) Priority in Requested Registrations. If (i) a ----------------------------------- requested registration pursuant to this Section 2.1 involves an underwritten offering of the securities so being registered (on a firm commitment basis) by or through one or more underwriters of recognized standing under underwriting terms appropriate for such a transaction and (ii) the managing underwriter shall advise the Company in writing (with a copy to each holder of Registrable Securities requesting registration) that, in its opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in (or during the time of) such offering without having a material adverse effect thereon (including on the price at which such Registrable 4 Securities are expected to be sold), then the Company will include in such registration, to the extent of the number of shares which the Company is so advised can be sold in (or during the time of) such offering, first, all securities requested by Prudential and SFER pursuant to Section 2.1(a) to be sold for its own account and second, all other Registrable Securities requested to be included in such registration on the basis of the percentage of the Registrable Securities of the Company held by the holders of Registrable Securities which have requested that such Securities be included. In connection with any registration as to which the provisions of this clause (g) apply, no securities other than Registrable Securities shall be covered by such registrations. 2.2. Incidental Registration. (a) Right to Include ---------------- Registrable Securities. If the Company at any time proposes to ---------------------- register any of its securities under the Securities Act (other than by a registration on Form S-8 or any successor or similar forms and other than pursuant to Section 2.1), whether or not for sale for its own account, it will each such time give prompt written notice to all holders of Registrable Securities of its intention to do so describing such securities and specifying the form and manner and the other relevant facts involved in such proposed registration (including, without limitation, in the case of an underwriting, the identity of the managing underwriter and whether such offering will be pursuant to a "best efforts" or "firm commitment" underwriting) and of such holders' rights under this Section 2.2. Upon the written request of any holder made within 30 days after the receipt of any such notice (which request shall specify the intended method of disposition of such holder's Registrable Securities), the Company will use its best efforts to effect the registration under the Securities Act of the Registrable Securities of such holder requested to be included in such registration, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of such Registrable Securities, provided that if, at any time after giving -------- written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities initially intended to be registered, the Company may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registrable Securities entitled to do so to request that such registration be effected as a registration under Section 2.1, and (ii) in the case of a determination to delay registering, shall 5 be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities. No registration effected under this Section 2.2 shall be deemed to have been effected pursuant to Section 2.1 or shall relieve the Company of its obligation to effect any registration upon request under Section 2.1. The Company will pay all Registration Expenses, other than registration fees relating to Registrable Securities to be sold for the account of the holder thereof and the fees and expenses of counsel for such holder, all of which will be at such holder's expense, in connection with each registration of Registrable Securities requested pursuant to this Section 2.2. (b) Priority in Incidental Registrations. If (i) a ------------------------------------ registration pursuant to this Section 2.2 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, to be distributed (on a firm commitment basis) by or through one or more underwriters of recognized standing under underwriting terms appropriate for such a transaction, (ii) the Company is requested to include any Registrable Securities under 2.2(a), and (iii) the managing underwriter of such underwritten offering shall inform the Company and the holders of the Registrable Securities requesting such registration by letter of its belief that the number of securities requested to be included in such registration exceeds the number which can be sold in (or during the time of) such offering, then the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in (or during the time of) such offering, first, all securities proposed by the Company to be sold for its own account, second, such Registrable Securities requested to be included in such registration pro rata on the basis of the number of shares of such securities so proposed to be sold and so requested to be included, and third, all other securities of the Company requested to be included in such registration pro rata on the basis of the number of shares of such securities so proposed to be sold and so requested to be included. 2.3. Registration Procedures. If and whenever the Company ----------------------- is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 2.1 and 2.2, the Company will as expeditiously as possible: (i) prepare and (as soon thereafter as possible or in any event no later than 60 days after the end of the period within which requests for registration may be given to the Company) file with the Commission the requisite registration statement to effect such registration and thereafter use its best efforts to cause such registration statement to become effective, provided -------- that the Company may discontinue any registration of its securities which are not Registrable 6 Securities (and, under the circumstances specified in Section 2.2(a), its securities which are Registrable Securities) at any time prior to the effective date of the registration statement relating thereto; (ii) prepare and file with the Commission such amendments (including post-effective amendments) and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement (which period shall in no event exceed 120 days from effectiveness of such registration statement); (iii) furnish to each seller of Registrable Securities covered by such registration statement such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request; (iv) use its best efforts to register or qualify all Registrable Securities and other securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each seller thereof shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not, but for the requirements of this subdivision (iv), be obligated to be so qualified, or to consent to general service of process in any such jurisdiction; (v) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the 7 seller or sellers thereof to consummate the disposition of such Registrable Securities; (vi) furnish to each seller of Registrable Securities and each Requesting Holder (as defined in Section 2.6), a signed counterpart, addressed to such seller and such Requesting Holder (and underwriters, if any) of (x) an opinion of counsel for the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to such seller, and (y) a "comfort" letter, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities and, in the case of the accountants' letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as such seller or such Requesting Holder, if any, may reasonably request; (vii) immediately notify each seller of Registrable Securities covered by such registration statement, each Requesting Holder, and their respective counsel (and the managing underwriter, if any) at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement (or deemed to be included in such registration statement if the registration statement, at the time it is declared effective, omits certain information pursuant to Rule 430A of the Securities Act), as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of any such seller or Requesting Holder promptly prepare and furnish to such 8 seller or Requesting Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (viii) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act, and will furnish to each such seller and Requesting Holder at least five business days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any amendment or supplement thereof to which any such seller or Requesting Holder shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (ix) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; (x) use its best efforts to list all Registrable Securities covered by such registration statement on any securities exchange on which any of the Company's capital stock is then listed; and (xi) enter into such agreements and take such other actions as the Requisite Holders shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that upon receipt of any notice 9 from the Company of the happening of any event of the kind described in subdivision (vii) of this Section 2.3, such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (vii) of this Section 2.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. 2.4 Underwritten Offerings. (a) Requested Underwritten ---------------------- Offerings. If requested by the underwriters for any underwritten --------- offering or by holders of Registrable Securities pursuant to a registration requested under Section 2.1, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to be satisfactory in substance and form to each such holder and the underwriters and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of this type, including, without limitation, indemnities to the effect and to the extent provided in Section 2.7. The holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that (i) any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and (ii) any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. Any such holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Registrable Securities, such holder's intended method of distribution and any other representation required by law. (b) Incidental Underwritten Offerings. If the Company at --------------------------------- any time proposes to register any of its securities under the Securities Act as contemplated by Section 2.2 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registrable Securities as provided in Section 2.2 and subject to the provisions of Section 2.2(b), arrange for such underwriters to include all the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters. The holders of Registrable Securities to be distributed by such underwriters shall be parties to the underwriting agree- 10 ment between the Company and such underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. Any such holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law. (c) In the event of any underwritten offering under a registration pursuant to Section 2.1 or 2.2 (other than in the case of a registration under Section 2.2, if the majority of the securities covered thereby are to be sold for the account of holders other than the Company), Prudential, SFER and each assignee of all Registrable Securities of any class or series owned by SFER or any Prudential Entity agree, if so required by the managing underwriters and to the extent timely notified in writing by the Company or by the managing underwriter or underwriters, not to effect any public sale or distribution (including any sale pursuant to Rule 144) of Registrable Securities (other than as part of such offering) within the period commencing seven days prior to the effective date of the registration statement with respect to such offering and ending 90 days after the effective date, or such lesser period agreed to by any other shareholders of the Company in connection with such registration, after the effective date of such registration statement. 2.5. Preparation; Reasonable Investigation. In connection ------------------------------------- with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company will give the holders of Registrable Securities registered under such registration statement, their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 11 2.6. Rights of Requesting Holders. The Company will not ---------------------------- file any registration statement under the Securities Act unless it shall first have given to SFER and each Prudential Entity that then owns shares of Registrable Securities at least 30 days prior written notice thereof and, if so requested by any Prudential Entity or SFER, shall have consulted with each Prudential Entity and SFER concerning the selection of underwriters, counsel and independent accountants for the Company for such offering and registration. If any Prudential Entity or SFER shall so request within 30 days after such notice, it shall be a "Requesting Holder" hereunder and shall have the rights of a Requesting Holder provided in this section 2.6 and in sections 2.3 and 2.7. The Company further covenants that a Requesting Holder shall have the right to participate in the preparation of any such registration or comparable statement and to require the insertion therein of material furnished to the Company in writing, which in such Requesting Holder's judgment should be included and, at the Company's expense, to retain counsel and/or independent public accountants (but limited to only one firm of independent public accountants for all Requesting Holders which will be determined by the affirmative vote of the holders of a majority of the number of Registrable Securities being registered) to assist such Requesting Holder in such participation. In addition, if any such registration statement refers to any Requesting Holder by name or otherwise as the holder of any securities of the Company, then such Requesting Holder shall have the right to require (x) the insertion therein of language, in form and substance satisfactory to such Requesting Holder, to the effect that the holding by such Requesting Holder of such securities does not necessarily make such Requesting Holder a "controlling person" of the Company within the meaning of the Securities Act and is not to be construed as a recommendation by such Requesting Holder of the investment quality of the Company's debt or equity securities covered thereby and that such holding does not imply that such Requesting Holder will assist in meeting any future financial requirements of the Company, or (y) in the event that such reference to such Requesting Holder by name or otherwise is not required by the Securities Act or any rules and regulations promulgated thereunder, the deletion of the reference to such Requesting Holder. 2.7. Indemnification. (a) Indemnification by the Company. --------------- ------------------------------ In the event of any registration of any securities of the Company under the Securities Act, the Company will, and hereby does, (i) in the case of any registration statement filed pursuant to Section 2.1 or 2.2, indemnify and hold harmless the seller of any Registrable Securities covered by such registration statement, its directors, officers, employees and agents and each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning 12 of the Securities Act, and (ii) in the case of any registration statement of the Company, indemnify and hold harmless any Requesting Holder, its directors, officers, employees and agents and each other Person, if any, who controls such Requesting Holder within the meaning of the Securities Act, in each case against any losses, claims, damages or liabilities, joint or several, to which such seller or Requesting Holder or any such directors, officers, employees, agents, underwriters or controlling persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse such seller, such Requesting Holder and all such directors, officers, employees, agents, underwriters and controlling persons for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that the -------- Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller or Requesting Holder, as the case may be, specifically stating that it is for use in the preparation thereof and, provided further that the -------- Company shall not be liable to any Person who participates as an underwriter, in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supple- mented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller, such Requesting Holder or any such director, officer, employee, agent, 13 underwriter or controlling person and shall survive the transfer of such securities by such seller. (b) Indemnification by the Sellers. The Company may ------------------------------ require, as a condition to including any Registrable Securities in any registration statement filed pursuant to Section 2.3, that the Company shall have received an undertaking satisfactory to it from the prospective seller of such securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 2.7) the Company, each director of the Company, each officer of the Company and each other Person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any seller of Registrable Securities hereunder be greater in amount than the dollar amount of the proceeds received by such seller upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an ---------------------- indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 2.7, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as -------- provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 2.7, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the 14 defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that --------------------- specified in the preceding subdivisions of this Section 2.7 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority other than the Securities Act. (e) Indemnification Payments. The indemnification required ------------------------ by this Section 2.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If for any reason the indemnification ------------ provided for in this Section 2.7 is unavailable to an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations; provided, however, that no holder shall be -------- ------- required to contribute in an amount greater than the dollar amount of the proceeds received by such holder with respect to the sale of any securities. The amount paid or payable by a party as a result of the losses, expenses, liabilities and claims referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any claim or action. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 2.8. Adjustments Affecting Registrable Securities. The -------------------------------------------- Company will not effect or permit to occur any combination or subdivision of shares which would adversely affect the ability of the holders of Registrable Securities to include such Registrable Securities in any registration of its securities contemplated by 15 this Section 2 or the marketability of such Registrable Securities under any such registration. 3. Definitions. As used herein, unless the context ----------- otherwise requires, the following terms have the following respective meanings: Commission: The Securities and Exchange Commission or any ---------- other Federal agency at the time administering the Securities Act. Company: As defined in the introductory paragraph of this ------- Agreement. Disadvantageous Condition: As defined in Section ------------------------- 2.1(a)(ii). Exchange Act: The Securities Exchange Act of 1934, or any ------------ similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934 shall include a reference to the comparable section, if any, of any such similar Federal statute. Existing Junior Preferred Stock: The Company's Junior ------------------------------- Cumulative Convertible Preferred Stock, Series B, par value $.01 per share. Junior Preferred Stock: As defined in Section 1. ---------------------- Merger Agreement: As defined in Section 1. ---------------- New Common Stock: As defined in Section 1. ---------------- Person: A corporation, an association, a partnership, a ------ business, an individual, a governmental or political subdivision thereof or a governmental agency. Prudential: As defined in the introductory paragraph of ---------- this Agreement. Prudential Entity: As defined in the introductory paragraph ----------------- of this Agreement. Purchase Agreement: As defined in Section 1. ------------------ Registrable Securities: (a) Any shares of Senior Preferred ---------------------- Stock issued to SFER pursuant to the Merger Agreement or the Company's Restated Certificate of Incorporation, as amended, (b) any shares of New Common Stock issued to SFER pursuant to the Merger Agreement, 16 (c) any shares of New Common Stock issued to any Prudential Entity as a result of the Merger, (d) any shares of Junior Preferred Stock issued to any Prudential Entity pursuant to the Merger Agreement and any shares of New Common Stock issued to any Prudential Entity upon conversion or exercise of such shares of Junior Preferred Stock, (e) any Trust Shares distributed to any Prudential Entity pursuant to the termination of the H/P Trust, and (f) any other securities received by any Prudential entity or SFER as or in connection with any dividend, distribution, split or recapitalization of any of the foregoing. Registration Expenses: All expenses incident to the --------------------- Company's performance of or compliance with Section 2, including, without limitation, all registration, filing and National Association of Securities Dealers fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding the cost of any special audit not required to be included in such registration statement by applicable law, rule or regulation, the fees and disbursements incurred by the holders of Registrable Securities to be registered or by any Requesting Holder (in each case, including the fees and disbursements of any counsel and accountants retained by the holders of Registrable Securities to be registered or by any Requesting Holder), premiums and other costs of policies of insurance against liabilities arising out of the public offering of the Registrable Securities being registered and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and transfer taxes, if any. In any case where, pursuant to Section 2.1(d), not all Registration Expenses are to be borne by the Company, the term "Registration Expenses" (as used to define the expenses to be allocated among all Persons requesting such registration) shall not include salaries of Company personnel or general overhead expenses of the Company, auditing fees, premiums or other expenses relating to liability insurance required by underwriters of the Company or other expenses for the preparation of financial state- ments or other data normally prepared by the Company in the ordinary course of its business or which the Company would have 17 incurred in any event all of which expenses shall be borne by the Company. Requesting Holder: As defined in Section 2.6. ----------------- Resumption Date: As defined in Section 2.1(a)(ii). --------------- Securities Act: The Securities Act of 1933, or any similar -------------- Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. References to a particular section of the Securities Act of 1933 shall include a reference to the comparable section, if any, of any such similar Federal Statute. Senior Preferred Stock: As defined in Section 1. ---------------------- Trust Shares: As defined in Section 1. ------------ Withdrawal Notice: As defined in Section 2.1(a)(ii). ----------------- 4. Rule 144; Rule 144A. ------------------- 4.1 Rule 144. The Company will file the reports required -------- to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder (or, if the Company is not required to file such reports, will, upon the request of any holder of Registrable Securities, make publicly available other information) and will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. 4.2 Rule 144A. The Company covenants that, if it is not --------- subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, it will, upon the request of any holder of Registrable Securities, make available such information as may be required by Rule 144A(d)(4) in order to permit sales pursuant to Rule 144A under the Securities Act. In addition, the Company will take such further action as any holder of Registrable Securities may reasonably request, to the extent required to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144A under the 18 Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. 5. Amendments and Waivers. This Agreement may be amended ---------------------- and the Company may take any action herein prohibited or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the holder or holders of 50% or more of the shares of each class of Registrable Securities affected thereby; provided that so long any Prudential Entity or SFER holds Registrable Securities affected thereby, its written consent shall be required for any amendment, action or omission to act. Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any consent authorized by this Section 5, whether or not such Registrable Securities shall have been marked to indicate such consent. 6. Nominees for Beneficial Owners. In the event that any ------------------------------ Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election, be treated as the holder of such Registrable Securities for purposes of any request or other action by any holder or holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any holder or holders of Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects to be so treated, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. 7. Notices. All communications provided for hereunder ------- shall be sent by first-class mail and (a) if addressed to a party or holder of Registrable Securities other than the Company, addressed to such entity in the manner set forth in the Purchase Agreement (with respect to Prudential) or the Merger Agreement (with respect to SFER), or at such other address as such party shall have furnished to the Company and the other holders of Registrable Securities in writing, or (b) if addressed to the Company, at 101 Park Avenue, Suite 1400, P.O. Box 26770, Oklahoma City, Oklahoma 73126-6770, Attention: Chief Financial Officer, or at such other address, or to the attention of such other officer, as the Company shall have furnished to each holder of Registrable Securities at the time outstanding; provided, however, -------- ------- that any such communication to the Company may also, at the option of any of the parties hereunder, be either delivered to the Company at its address set forth above or to any officer of the Company. 19 8. Assignment. This Agreement shall be binding upon and ---------- inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. Any transferee of any Registrable Securities hereunder that is not, under applicable law, permitted to publicly resell such Registrable Securities without restriction may become a holder of Registrable Securities hereunder upon such person's acquisition of such Registrable Securities by executing a counterpart hereof; provided, however, that no transferee -------- ------- of any Prudential Entity or SFER, other than an affiliate of such transferor, shall be entitled to exercise any right hereunder which is designated as being a right of any Prudential Entity or SFER, respectively (other than generally as a holder of Registrable Securities), unless such transferee has acquired all Registrable Securities owned by such Prudential Entity or SFER, respectively. 9. Descriptive Headings. The descriptive headings of the -------------------- several sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof. 10. Specific Performance. The parties hereto recognize and -------------------- agree that money damages may be insufficient to compensate the holders of any Registrable Securities for breaches by the Company of the terms hereof and, consequently, that the equitable remedy of specific performance of the terms hereof will be available in the event of any such breach. 11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ------------- ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS. 12. Counterparts. This Agreement may be executed ------------ simultaneously in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. 20 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. HADSON CORPORATION By:___________________________ Title: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By:___________________________ Title: PRUCO LIFE INSURANCE COMPANY By:____________________________ Title: PRUSUPPLY, INC. By:____________________________ Title: SANTA FE ENERGY RESOURCES, INC. By:____________________________ Title: SFER PIPELINE INC. By:____________________________ Title: 21 EX-4 5 SECURITIES AGREEMENT SECURITIES PURCHASE AGREEMENT _________________________________________________________________ _________________________________________________________________ HADSON CORPORATION $56,400,000 SENIOR SECURED NOTES Dated as of December 14, 1993 _________________________________________________________________ _________________________________________________________________ NYFS05...:\33\68533\0020\1870\AGR92393.U2G TABLE OF CONTENTS Page ---- 1. ISSUANCE AND EXCHANGE OF SECURITIES . . . . . . . . . . . . . 3 2. CLOSING OF THE ISSUANCE AND EXCHANGE OF SECURITIES . . . . . 4 2A. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 4 3. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 6 3A. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . 6 3A(1). CERTAIN DOCUMENTS . . . . . . . . . . . . . . . . . 6 3A(2). OPINION OF PURCHASERS' SPECIAL COUNSEL . . . . . . . 10 3A(3). REPRESENTATIONS AND WARRANTIES; NO DEFAULT . . . . . 10 3A(4). RECEIPT PERMITTED BY APPLICABLE LAWS . . . . . . . . 10 3A(5). PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 11 3A(6). MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . 11 3A(7). FEES AND EXPENSES PAID . . . . . . . . . . . . . . . 11 4. PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 11 4A. REQUIRED PREPAYMENTS . . . . . . . . . . . . . . . . . 11 4B. OPTIONAL PREPAYMENT . . . . . . . . . . . . . . . . . . 12 4C. NOTICE OF PREPAYMENT . . . . . . . . . . . . . . . . . 13 4D. PARTIAL PREPAYMENTS PRO RATA . . . . . . . . . . . . . 13 4E. RETIREMENT OF NOTES . . . . . . . . . . . . . . . . . . 13 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 14 5A. FINANCIAL STATEMENTS; REPORTS . . . . . . . . . . . . . 14 5B. INFORMATION REQUIRED BY RULE 144A . . . . . . . . . . . 17 5C. INSPECTION OF PROPERTY . . . . . . . . . . . . . . . . 18 5D. COVENANT TO SECURE NOTES EQUALLY . . . . . . . . . . . 18 5E. MAINTENANCE OF PROPERTIES; INSURANCE . . . . . . . . . 18 5F. CORPORATE EXISTENCE, ETC. . . . . . . . . . . . . . . . 19 5G. PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . 19 5H. COMPLIANCE WITH LAWS, ETC. . . . . . . . . . . . . . . 20 5I. TRUST. . . . . . . . . . . . . . . . . . . . . . . . 20 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 20 P-1 Page ---- 6A. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . 20 6B. DIVIDEND LIMITATION . . . . . . . . . . . . . . . . . . 20 6C. LIEN, DEBT, AND OTHER RESTRICTIONS . . . . . . . . . . 21 6C(1). LIENS . . . . . . . . . . . . . . . . . . . . . . . 22 6C(2). DEBT . . . . . . . . . . . . . . . . . . . . . . . . 24 6C(3). LOANS, ADVANCES, INVESTMENTS AND CONTINGENT LIABILITIES . . . . . . . . . . . . . . . . . . . . 26 6C(4). INTENTIONALLY OMITTED . . . . . . . . . . . . . . . 28 6C(5). MERGER AND SALE OF ASSETS . . . . . . . . . . . . . 28 6C(6). LEASE RENTALS . . . . . . . . . . . . . . . . . . . 30 6C(7). SALE AND LEASE-BACK . . . . . . . . . . . . . . . . 31 6C(8). SALE OR DISCOUNT OF RECEIVABLES . . . . . . . . . . 31 6C(9). CERTAIN CONTRACTS . . . . . . . . . . . . . . . . . 31 6C(10). PRIORITY DEBT . . . . . . . . . . . . . . . . . . . 33 6C(11). TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . 33 6C(12). TRANSFER OF ASSETS TO SUBSIDIARIES . . . . . . . . 34 6C(13). SUBSIDIARY DIVIDEND RESTRICTIONS . . . . . . . . . 34 6D. ISSUANCE OF STOCK BY SUBSIDIARIES; CERTAIN CHANGES . . 34 6E. COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . 35 6F. MAINTENANCE OF BUSINESS . . . . . . . . . . . . . . . . 37 6G. MODIFICATION OF MATERIAL AGREEMENTS . . . . . . . . . . 37 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 38 7A. ACCELERATION . . . . . . . . . . . . . . . . . . . . . 38 7B. RESCISSION OF ACCELERATION . . . . . . . . . . . . . . 42 7C. NOTICE OF ACCELERATION OR RESCISSION . . . . . . . . . 43 7D. OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . 43 8. REPRESENTATIONS, COVENANTS AND WARRANTIES . . . . . . . . . . 43 8A. ORGANIZATION; AUTHORITY; ENFORCEABILITY . . . . . . . . 43 8B. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . 44 8C. ACTIONS PENDING . . . . . . . . . . . . . . . . . . . . 45 8D. OUTSTANDING DEBT . . . . . . . . . . . . . . . . . . . 45 8E. TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . 45 8F. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 46 8G. CONFLICTING AGREEMENTS AND OTHER MATTERS . . . . . . . 46 8H. OFFERING OF SECURITIES . . . . . . . . . . . . . . . . 47 P-2 Page ---- 8I. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . 47 8J. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 48 8K. GOVERNMENTAL CONSENT . . . . . . . . . . . . . . . . . 49 8L. ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . 49 8M. DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . 50 8N. CAPITAL STOCK AND RELATED MATTERS . . . . . . . . . . . 51 8O. PATENTS, LICENSES, ETC. . . . . . . . . . . . . . . . . 51 8P. INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . 52 8Q. PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . 52 8R. SECURITY INTERESTS . . . . . . . . . . . . . . . . . . 52 8S. DELIVERY OF BMO CREDIT AGREEMENT . . . . . . . . . . . 52 9. REPRESENTATIONS OF EACH PURCHASER . . . . . . . . . . . . . . 52 9A. NATURE OF PURCHASE . . . . . . . . . . . . . . . . . . 52 9B. SOURCE OF FUNDS . . . . . . . . . . . . . . . . . . . . 53 10. DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . 53 10A. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 53 10B. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS . . . 65 10C. COMPUTATION OF TIME PERIODS . . . . . . . . . . . . . 66 11. JUDICIAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 66 11A. CONSENT TO JURISDICTION . . . . . . . . . . . . . . . 66 11B. ENFORCEMENT OF JUDGMENTS . . . . . . . . . . . . . . . 66 11C. SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . 67 11D. NO LIMITATION ON SERVICE OR SUIT . . . . . . . . . . . 67 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 67 12A. NOTE PAYMENTS . . . . . . . . . . . . . . . . . . . . 67 12B. EXPENSES; INDEMNITY . . . . . . . . . . . . . . . . . 68 12C. CONSENT TO AMENDMENTS . . . . . . . . . . . . . . . . 70 12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES . . . . . . . . . . . . . . . . . . . . . . 71 12E. PERSONS DEEMED OWNERS; PARTICIPATIONS . . . . . . . . 72 12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS; ENTIRE AGREEMENT . . . . . . . . . . . . . . 72 12G. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . 73 P-3 Page ---- 12H. DISCLOSURE TO OTHER PERSONS . . . . . . . . . . . . . 73 12I. NOTICES . . . . . . . . . . . . . . . . . . . . . . . 74 12J. PAYMENTS DUE ON NON-BUSINESS DAYS . . . . . . . . . . 74 12K. SATISFACTION REQUIREMENT . . . . . . . . . . . . . . . 74 12L. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 75 12M. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . 75 12N. DESCRIPTIVE HEADINGS . . . . . . . . . . . . . . . . . 75 12O. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 75 12P. SEVERALTY OF OBLIGATIONS . . . . . . . . . . . . . . . 75 PURCHASER SCHEDULE SCHEDULE 3A(6) -- CERTAIN EVENTS SCHEDULE 6C(1) -- CERTAIN LIENS SCHEDULE 6C(3) -- PERMITTED INVESTMENTS SCHEDULE 6C(9) -- CERTAIN CONTRACTS SCHEDULE 8C -- CERTAIN PENDING OR THREATENED LITIGATION SCHEDULE 8D -- OUTSTANDING DEBT SCHEDULE 8E -- PROPERTY DISPOSED OF SINCE DECEMBER 31, 1992 SCHEDULE 8G -- CONFLICTING AGREEMENTS SCHEDULE 8J -- CERTAIN ERISA PLANS SCHEDULE 8T -- CERTAIN SUBSIDIARIES EXHIBIT A -- FORM OF SENIOR SECURED NOTE EXHIBIT B -- FORM OF CERTIFICATE OF MERGER P-4 EXHIBIT C -- FORM OF COLLATERAL AGENCY AGREEMENT EXHIBIT D -- FORM OF INTERCREDITOR AGREEMENT EXHIBIT E -- FORM OF OPINION OF COMPANY'S SPECIAL COUNSEL EXHIBIT E-1 -- FORM OF OPINION OF COMPANY'S DELAWARE COUNSEL EXHIBIT F -- FORM OF OPINION OF COMPANY'S COUNSEL EXHIBIT F-1 -- FORM OF OPINION OF COMPANY'S COUNSEL EXHIBIT G -- FORM OF REGISTRATION RIGHTS AGREEMENT EXHIBIT H -- FORM OF CASH COLLATERAL AGREEMENT EXHIBIT I -- FORM OF VOTING AGREEMENT EXHIBIT K -- FORM OF BY-LAW AMENDMENTS EXHIBIT S -- FORM OF OPINION OF SFER'S COUNSEL EXHIBIT T -- FORM OF TRUST AGREEMENT P-5 HADSON CORPORATION 101 Park Avenue, Suite 1400 Oklahoma City, OK 73102 As of December 14, 1993 To Each of the Purchasers Named in the Purchaser Schedule Attached Hereto Ladies and Gentlemen: The undersigned, Hadson Corporation, a Delaware corporation (the "COMPANY"), and each of the institutions listed on the Purchaser Schedule (collectively, the "PURCHASERS"), hereby agree as follows: PRELIMINARY STATEMENT. The Company and the Purchasers entered into a Restated Securities Purchase Agreement, dated as of December 16, 1992 (the "EXISTING PURCHASE AGREEMENT"), pursuant to which, among other things, the Company issued to the Purchasers secured promissory notes in the aggregate principal amount of $56,400,000.00 (the "EXISTING NOTES"), 49,500 shares of the Company's 7% Senior Cumulative Preferred Stock, Series A, par value $.01 per share (the "EXISTING SENIOR PREFERRED"), 300,000 shares of the Company's Common Stock, par value $.01 per share (the "EXISTING COMMON"), 72,704,000 shares of the Company's Class B Common Stock, par value $.01 per share (the "EXISTING CLASS B COMMON"), and 11,341,000 shares of the Company's Class C Common Stock, par value $.01 per share (the "EXISTING CLASS C COMMON"). CAPITALIZED TERMS USED HEREIN AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS SPECIFIED IN PARAGRAPH 10. 1 The Company has entered into an Agreement of Merger, dated as of July 28, 1993, and amended as of November 9, 1993 (as so amended, the "MERGER AGREEMENT"), with Santa Fe Energy Resources, Inc., a Delaware corporation ("SFER"), and Adobe Gas Pipeline Company, a Delaware corporation ("AGPC") and a wholly owned subsidiary of SFER Pipeline, Inc., a Delaware corporation and a wholly-owned subsidiary of SFER ("Pipeline"), pursuant to which AGPC will be merged with and into the Company, with the subsidiaries of AGPC thereby becoming Subsidiaries of the Company (the "MERGER"). Pursuant to the Merger Agreement, as of the Effective Time (as defined in the Merger Agreement), (i) all of the shares of common stock of AGPC will be converted into 2,080,000 shares of Senior Preferred Stock and such number of shares of New Common as is set forth in Section 2.7 of the Merger Agreement, (ii) each share of the Company's 8% Junior Cumulative Convertible Preferred Stock, Series B, par value $.01 per share (the "OLD JUNIOR PREFERRED"), outstanding immediately prior to the Merger will be converted into 1.50733 shares of New Common and 1.09667 shares of New Junior Preferred Stock, (iii) each share of Existing Common outstanding immediately prior to the Merger will be converted into (A) .06667 (approximately 1/15th) of a share of New Common and (B) a number of shares of New Junior Preferred Stock equal to the quotient of (1) the amount, if positive, by which (a) 4,983,180 exceeds (b) the product of 1.09667 times the number of shares of Old Junior Preferred outstanding immediately prior to the Merger divided by (2) the number of shares of Existing Common outstanding immediately prior to the Merger, (iv) the shares of the Existing Class B Common outstanding immediately prior to the Merger will be converted into the right to receive a beneficial interest in the Trust, (v) each share of Existing Class C Common outstanding immediately prior to the Merger will be converted into .06667 (approximately 1/15th) of a share of New Common and (vi) the shares of the Existing Senior Preferred outstanding immediately prior to the Merger will be converted into an aggregate of 553,658 shares of New Common, the right to receive a beneficial interest in the Trust and the right to receive $33,000,000 aggregate principal amount of the Company's senior secured promissory notes (the 2 "MERGER NOTES") (such conversions described in clauses (i) through (vi) being referred to, collectively, as the "CONVERSIONS"). On the Effective Date, the Company will settle a trust with 4,983,180 shares of New Common naming the Purchasers as the beneficiaries thereof in accordance with the terms of the Trust Agreement. Immediately following the Merger, HEPSI will be merged with and into the Company, with the Subsidiaries directly owned by HEPSI, thereby becoming direct Subsidiaries of the Company. On the date hereof, the Purchasers are entering into this Securities Purchase Agreement (this "AGREEMENT") with the Company, pursuant to which, among other things, (i) the indebtedness and obligations of the Company under the Existing Purchase Agreement will be, on and as of the Effective Date, exchanged for $23,400,000 aggregate principal amount of the Company's senior secured promissory notes (the "EXCHANGE NOTES" and, together with the Merger Notes, the "SENIOR SECURED NOTES"), (ii) the Company will issue the Merger Notes and (iii) certain rights and obligations of the parties with respect to the Senior Secured Notes and the securities issued to the Purchasers pursuant to the Merger Agreement are set forth. The Company has requested that the Purchasers enter into this Agreement for such purposes. The Purchasers are, on the terms and subject to the satisfaction of the conditions stated below, agreeable to granting the request of the Company and the Company and the Purchasers have agreed, subject to the satisfaction of such conditions, to terminate the Existing Purchase Agreement in its entirety, except to the extent specifically set forth herein. 1. ISSUANCE AND EXCHANGE OF SECURITIES. On the Effective Date, the Company shall have authorized the issuance and payment of and shall issue and pay or deliver to each Purchaser, and each Purchaser shall receive, in the amounts set forth opposite such Purchaser's name in the Purchaser Schedule attached hereto: 3 (i) (A) subject to the terms and conditions hereinafter set forth, the Exchange Notes in the aggregate original principal amount of $23,400,000 in exchange for the Existing Notes and (B) the Merger Notes, all such Notes to be dated the Effective Date, to mature on December 31, 2003, to bear interest on the unpaid balance thereof from the date thereof until the principal thereof shall become due and payable at the rate equal to 8.0% per annum, and to be substantially in the form of Exhibit A attached hereto; and (ii) certificates evidencing the aggregate of 1,309,762 full shares of New Common issuable upon the Conversion of the Existing Class C Common and the Existing Senior Preferred pursuant to the Merger Agreement, which New Common shall have the rights to be set forth in the Restated Certificate of Incorporation of the Company as proposed to be amended pursuant to the Certificate of Merger with respect to the Merger (the "CERTIFICATE OF MERGER"), which shall be substantially in the form of Exhibit B attached hereto (as so amended, the "NEW RESTATED CERTIFICATE OF INCORPORATION"); and (iii) subject to the terms and conditions hereinafter set forth, cash payments in an aggregate amount equal to accrued and unpaid interest on the Existing Notes as of the Effective Date at the rate set forth in the Existing Notes (the "CASH PAYMENTS"). The term "NOTES" as used herein shall include each Senior Secured Note and each Note delivered in substitution or exchange for any such Note pursuant to this Agreement. The term "EQUITY SECURITIES" shall mean the shares of New Common described in clause (ii) above. The term "SECURITIES" shall mean the Notes and the Equity Securities. 2. CLOSING OF THE ISSUANCE AND EXCHANGE OF SECURITIES. 2A. CLOSING. On the Effective Date, which shall occur as promptly as practicable following the Effective Time (the 4 "CLOSING" or the "DATE OF CLOSING"), the Company will deliver to each Purchaser, at the offices of Weil, Gotshal & Manges at 767 Fifth Avenue, New York, New York, against surrender by such Purchaser of its Existing Notes and the stock certificates evidencing its Existing Class B Common, Existing Class C Common and Existing Senior Preferred, as applicable, (i) the Senior Secured Notes evidencing the aggregate principal amount of the Senior Secured Notes to be received by such Purchaser, in the denomination or denominations specified with respect to such Purchaser in the Purchaser Schedule, (ii) stock certificates, registered in such Purchaser's name, evidencing the aggregate number of shares of New Common to be received by such Purchaser in the numbers specified with respect to such Purchaser in the Purchaser Schedule, and (iii) by wire transfer of immediately available funds to the account indicated with respect to such Purchaser on the Purchaser Schedule, the aggregate amount of Cash Payments to be received by such Purchaser. Immediately upon surrender, the Existing Notes will be cancelled and the Existing Purchase Agreement will be automatically terminated, except to the extent expressly set forth herein. Upon receipt by the Purchasers of the Senior Secured Notes, the Equity Securities, and the Cash Payments as set forth above, The Prudential Insurance Company of America shall deliver, free and clear of any and all liens created by or consented to by any of the Purchasers or by The Prudential Insurance Company of America, in its capacity as agent for the Purchasers, (a) to the Company (x) all funds being held by it as collateral for the obligations under the Existing Notes pursuant to that certain Cash Collateral Agreement, dated as of July 15, 1993, as amended, between the Company and The Prudential Insurance Company of America, as agent for the benefit of the purchasers under the Existing Purchase Agreement, by wire transfer of such funds to the Company's Account No. 2-927-929, ABA No. 031000037, at Mellon Bank, N.A., Philadelphia, Pennsylvania and (y) all certificates and instruments being held by it as collateral for the Existing Notes which are not being delivered to the Collateral Agent as set forth in clause (b) below and (b) to the Collateral Agent all certificates and instruments being held by it as collateral for 5 the Existing Notes which will be held by the Collateral Agent as Collateral. As promptly as practicable after the Closing, the Company shall pay to each Purchaser, by business check, any cash payable to such Purchaser in lieu of any fractional shares of New Common pursuant to Section 2.9(a) of the Merger Agreement. 3. CONDITIONS. 3A. CONDITIONS OF CLOSING. The effectiveness of this Agreement and the obligation of each Purchaser to exchange its Existing Notes as set forth herein is subject to the satisfaction, on or before the Date of Closing, of each of the following conditions: 3A(1). CERTAIN DOCUMENTS. Each Purchaser shall have received the following, each dated the Date of Closing: (i) The Senior Secured Notes, certificates evidencing the Equity Securities and the Cash Payments. (ii) Certified copies of the resolutions of the Board of Directors of the Company and each of its Subsidiaries, as the case may be, authorizing and approving (a) this Agreement, the Registration Rights Agreement, the Trust Agreement, the Present Collateral Documents, and the issuance of the Securities and (b) the Merger Agreement, the HEPSI Merger and each of the other Related Transactions, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Registration Rights Agreement, the Trust Agreement, the Present Collateral Documents, the Securities, the Merger, the HEPSI Merger and each other Related Transaction and the transactions contemplated hereby and thereby, as the Purchasers may reasonably request. (iii) Certified copies of the resolutions of the Board of Directors of each of SFER and Pipeline authorizing and approving the Registration Rights Agreement, the Voting 6 Agreement, and in the case of SFER, the Merger Agreement, and the transactions contemplated thereby, accompanied by a certificate of the Secretary or an Assistant Secretary of each of SFER and Pipeline certifying the names and the true signatures of the officers of such company authorized to execute each such agreement. (iv) A certificate of the Secretary or an Assistant Secretary of the Company and each of its Subsidiaries, as the case may be, certifying the names and true signatures of the officers of the Company and each of its Subsidiaries, as the case may be, authorized to execute this Agreement, the Registration Rights Agreement, the Trust Agreement, the Present Collateral Documents, the Notes and the other documents to be delivered hereunder. (v) Certified copies of the by-laws of the Company, as proposed to be amended by the by-law amendments in the form of Exhibit K attached hereto (as amended, the "BY-LAWS"), which shall be in full force and effect. (vi) A favorable opinion of (A) Kelley Drye & Warren, special New York counsel to the Company, (B) Potter Anderson & Corron, special Delaware counsel to the Company, (C) Vinson & Elkins L.L.P., special counsel to the Company, and (D) Diamond, Stuart & Timmons, counsel to the Company, satisfactory to the Purchasers and substantially in the form of Exhibits E, E-1, F and F-1, respectively, attached hereto, and as to such other matters as the Purchasers may reasonably request. (vii) A favorable opinion of Andrews & Kurth, L.L.P., counsel to SFER and Pipeline, satisfactory to the Purchasers and substantially in the form of Exhibit S attached hereto, and as to such other matters as the Purchasers may reasonably request. 7 (viii) Copies of the Present Collateral Documents, duly executed and delivered by the Company, and each Subsidiary a party thereto, each in form and substance satisfactory to the Purchasers, with copies of each of the following: (A) executed copies of financing statements (Form UCC- 1) to be filed under the Uniform Commercial Code of each jurisdiction as may be necessary or, in the opinion of the Purchasers, desirable to perfect the security interests created by such Present Collateral Documents; (B) certificates representing the shares of stock pledged under such Present Collateral Documents and undated stock powers for such certificates executed in blank; (C) promissory notes representing the notes pledged under such Present Collateral Documents and undated bond powers for such notes executed in blank; and (D) such evidence that all other actions necessary or, in the opinion of the Purchasers, desirable to perfect and effect the security interests created by such Present Collateral Documents have been taken (other than (i) filing of financing statements, which shall be filed as promptly as practicable after the Closing and (ii) perfection of the Collateral Agent's interest in bank accounts and disbursing accounts of the Company). (ix) Copies of certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements which name the Company or any Sub- sidiary (under its present name and any previous name) a party to the Present Collateral Documents, 8 as debtor and which are filed in all jurisdictions in which the Company or such Subsidiary owns property or conducts business together with copies of such financing statements. (x) The Registration Rights Agreement, duly executed and delivered by the Company, SFER and Pipeline in the form of Exhibit G attached hereto (the "REGISTRATION RIGHTS AGREEMENT"). (xi) A copy of the BMO Credit Agreement together with all related documents thereto (other than the Present Collateral Documents), certified by an officer of the Company as being a true and correct copy of each such document, in form and substance satisfactory to the Purchasers. (xii) The Intercreditor Agreement, duly executed by BMO, as Agent under the BMO Credit Agreement. (xiii) [Intentionally Omitted]. (xiv) Evidence that the Certificate of Merger has been duly executed by the Company and has been duly filed with the Secretary of State of the State of Delaware. (xv) Evidence that a certificate of merger with respect to the HEPSI Merger, in form and substance satisfactory to the Purchasers, has been duly executed by the Company and has been duly filed with the Secretary of State of the State of Delaware. (xvi) The Voting Agreement, duly executed by SFER and Pipeline. (xvii) The Collateral Agency Agreement duly executed by the Collateral Agent and BMO, as Agent under the BMO Credit Agreement, in substantially the form of Exhibit C hereto (the "COLLATERAL AGENCY AGREEMENT"). 9 (xviii) The Trust Agreement, duly executed by the Company and the Trustee, in substantially the form of Exhibit T hereto. (xix) Such additional documents, information and materials as the Purchasers may reasonably request, including, without limitation, copies of any debt agreements, security agreements and other material contracts to which the Company or any Subsidiary is a party. 3A(2). OPINION OF PURCHASERS' SPECIAL COUNSEL. Such Purchaser shall have received from Weil, Gotshal & Manges, who are acting as special counsel for the Purchasers in connection with this transac- tion, a favorable opinion satisfactory to such Purchaser as to such matters incident to the matters herein contemplated as it may reasonably request. 3A(3). REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and warranties of the Company and each Subsidiary contained in paragraph 8 of this Agreement and in each of the Present Collateral Documents shall be true on and as of the Date of Closing; there shall exist on the Date of Closing no Event of Default or Default; and the Company shall have delivered to such Purchaser an Officer's Certificate satisfactory to such Purchaser, dated the Date of Closing, attesting to both such effects. 3A(4). RECEIPT PERMITTED BY APPLICABLE LAWS. (i) The purchase of and payment for (by exchange of the Existing Notes) the Exchange Notes to be acquired by such Purchaser on the Date of Closing on the terms and conditions herein provided, (ii) the receipt by the Purchaser of the Merger Notes, the Equity Securities and the other interests to which it is entitled under the Merger Agreement and (iii) the establishment of the Trust on the Date of Closing on the terms and conditions provided in the Trust Agreement shall not violate any applicable law or governmental regulation (including, without limitation, section 5 of the Securities Act or Regulation G, T or X of the Board of 10 Governors of the Federal Reserve System) and shall not subject such Purchaser to any tax, penalty, liability or other onerous condition under or pursuant to any applicable law or governmental regulation, and such Purchaser shall have received such certificates or other evidence as it may request to establish compliance with this condition. 3A(5). PROCEEDINGS. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and the Related Transactions and all documents incident thereto shall be satisfactory in substance and form to such Purchaser, and such Purchaser shall have received all such counterpart originals or certified or other copies of such documents as it may reasonably request. 3A(6). MATERIAL ADVERSE EFFECT. No event shall have occurred since December 31, 1992 and be continuing which in the judgment of any Purchaser has had or could reasonably be expected to have a Material Adverse Effect other than as set forth on Schedule 3A(6). 3A(7). FEES AND EXPENSES PAID. The Purchasers shall have received evidence satisfactory to them that the fees and expenses to be paid by the Company on the date hereof pursuant to paragraph 12B shall have been paid in full. 4. PREPAYMENTS. The Notes shall be subject to prepayment with respect to the required prepayments specified in paragraph 4A and the optional prepayments permitted by paragraph 4B. 4A. REQUIRED PREPAYMENTS. (i) Until the Notes shall be paid in full, the Company shall apply to the prepayment of the Notes, without premium, (A) $2,500,000 on the Closing Date, (B) $1,000,000, on or prior to August 1, 1994 and (C) such sums as shall reduce the outstanding principal amount of the Notes, as of December 31 in the year set forth below, to the amount set forth opposite such year: 11
Year Outstanding Principal Amount ---- ---------------------------- 1994 $52,900,000.00 1995 52,900,000.00 1996 50,400,000.00 1997 44,500,000.00 1998 36,500,000.00 1999 28,500,000.00 2000 20,500,000.00 2001 12,500,000.00 2002 4,500,000.00 2003 0.00
Each such prepayment shall be in integral multiples of $500,000 and be accompanied by interest on the amount prepaid at the rate specified in the Notes to such prepayment date. Each such payment described in the immediately preceding clause (C), if not earlier made, shall become due on December 31 in the relevant year. (ii) Upon receipt by the Company of the proceeds of Asset Sales in excess of the amounts set forth in paragraph 6C(5)(iv) which the Company either (x) does not intend to use for the acquisition of other assets within 90 days as set forth in such paragraph or (y) does not so use within the 90 days set forth in such paragraph, the Company shall apply such excess to the prepayment of the principal of the Notes, and to the payment of interest to such prepayment date on the amount prepaid at the rate specified in the Notes, without premium. 4B. OPTIONAL PREPAYMENT. The Notes shall be subject to prepayment, in whole at any time or from time to time in part (but any such partial payment shall be in integral multiples of $500,000), without premium, at the option of the Company, at 100% of the principal amount so prepaid plus interest accrued thereon to the prepayment date. 12 4C. NOTICE OF PREPAYMENT. The Company shall give the holder of each Note irrevocable written notice of any prepayment pursuant to paragraph 4A or 4B not less than 10 Business Days prior to the prepayment date, specifying such prepayment date and the principal amount of the Notes, and of the Notes held by such holder, to be prepaid on such date and stating that such prepayment is to be made pursuant to paragraph 4A or 4B. Notice of prepayment having been given as aforesaid, the principal amount of the Notes specified in such notice, together with interest thereon to the prepayment date, shall become due and payable on such prepayment date. The Company shall, on or before the day on which it gives written notice of any prepayment, give telephonic notice of the principal amount of the Notes to be prepaid and the prepayment date to each Significant Holder which shall have designated a recipient of such notices in the Purchaser Schedule attached hereto or by notice in writing to the Company. 4D. PARTIAL PREPAYMENTS PRO RATA. Upon any partial prepayment of the Notes pursuant to paragraph 4A or 4B, the principal amount so prepaid shall be allocated to all Notes at the time outstanding (including, for the purpose of this paragraph 4D only, all outstanding Notes purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates other than by prepayment pursuant to paragraph 4A or 4B) in proportion to the respective outstanding principal amounts thereof. 4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in part prior to their stated final maturity (other than by prepayment pursuant to paragraph 4A or 4B or upon acceleration of such final maturity pursuant to paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes held by any holder unless the Company or such Subsidiary or Affiliate shall have offered to prepay or otherwise retire or purchase or otherwise acquire, as the case may be, the same proportion of the aggregate principal amount of Notes held by 13 each other holder of Notes at the time outstanding upon the same terms and conditions. Any Notes so prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates shall not be deemed to be outstanding for any purpose under this Agreement, except as provided in paragraph 4D. 5. AFFIRMATIVE COVENANTS. From and after the Effective Date, (i) so long as any Note shall remain unpaid and (ii) following the payment of the Notes in full, with respect to paragraphs 5A, 5B and 5C, if and so long as the Company is not subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and any Purchaser holds Equity Securities, the Company covenants that: 5A. FINANCIAL STATEMENTS; REPORTS. The Company will deliver to each Significant Holder in quadruplicate (delivery in quadruplicate to The Prudential Insurance Company of America will satisfy the Company's obligation to deliver such reports to Prudential hereunder): (i) as soon as available and in any event within 30 days after the end of each fiscal year of the Company, consolidating and consolidated statements of projected income from operations and of projected cash flows and a consolidating and consolidated projected balance sheet of the Company and its Subsidiaries, in each case for the following fiscal year, such projected statements to be prepared on a quarterly basis and to be based, and reported by the chief executive officer, chief financial officer or treasurer of the Company as being based, on the Company's best estimates, information and assumptions at the time, and all such statements to be in reasonable detail and supported by a schedule enumerating the principal assumptions incorporated therein; (ii) as soon as practicable and in any event within 45 days after the end of each month in each fiscal year of the 14 Company (other than the last month in each fiscal year), consolidating and consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for such month and, in the case of the last month of a quarterly period, for such quarterly period and for the period from the beginning of the current fiscal year to the end of such quarterly period, and consolidating and consolidated balance sheets of the Company and its Subsidiaries as at the end of such month, setting forth in the case of the consolidated statements in comparative form corresponding consolidated figures for the corresponding month, and in the case of the last month of a quarterly period, for the corresponding period in the preceding fiscal year, all in reasonable detail and satisfactory in form to the Required Holder(s) and certified by an authorized financial officer of the Company, subject to changes resulting from year- end adjustments; provided, however, that delivery pursuant to ------------------ clause (iv) below of copies of the Quarterly Report on Form 10-Q of the Company for any such quarterly period filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this clause (ii) with respect to consolidated financial statements for such quarterly period; (iii) as soon as practicable and in any event within 120 days after the end of each fiscal year, consolidating and consolidated statements of income and cash flows and a consolidated statement of stockholders' equity of the Company and its Subsidiaries for such year, and a consolidating and consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, setting forth in the case of such consolidated statements in comparative form corresponding consolidated figures from the preceding annual audit, all in reasonable detail and satisfactory in form to the Required Holder(s) and, as to the consolidated statements, reported on by independent public accountants of recognized national standing selected by the Company whose report shall be without limitation as 15 to the scope of the audit and satisfactory in substance to the Required Holder(s) and, as to the consolidating statements, certified by an authorized financial officer of the Company; provided, however, that delivery pursuant to clause (iv) below of -------- ------- copies of the Annual Report on Form 10-K of the Company for such fiscal year filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this clause (iii) with respect to consolidated financial statements; (iv) promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to the holders of its outstanding securities (or trustees or agents therefor) and copies of all registration statements (without exhibits) and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission); (v) promptly upon receipt thereof, a copy of each other report submitted to the Company or any Subsidiary by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company or any Subsidiary; (vi) promptly after the filing or receiving thereof, copies of all reports and notices which the Company or any ERISA Affiliate files under ERISA with the Internal Revenue Service, the PBGC or the U.S. Department of Labor or which the Company or any ERISA Affiliate receives from the PBGC, in each case which relate to any Lien or liability not permitted by this Agreement; (vii) upon delivery thereof to BMO, a copy of all financial statements and reports delivered to BMO by the Company pursuant to the BMO Credit Agreement, unless the same has been delivered under this Agreement; and 16 (viii) with reasonable promptness, such other information respecting the condition or operations, financial or otherwise, of the Company or any of its Subsidiaries as such Significant Holder may reasonably request. Together with each delivery of financial statements required by clauses (ii) and (iii) above, the Company will deliver to each Significant Holder an Officer's Certificate demonstrating (with computations in reasonable detail) compliance by the Company and its Subsidiaries with the provisions of paragraphs 6B and 6C(1) through 6C(13) inclusive and stating that there exists no Event of Default or Default, or, if any Event of Default or Default exists, specifying the nature and period of existence thereof and what action the Company proposes to take with respect thereto. Together with each delivery of financial statements required by clause (iii) above, the Company will deliver to each Significant Holder a certificate of such accountants stating that, in making the audit necessary for their report on such financial statements, they have obtained no knowledge of any Event of Default or Default, or, if they have obtained knowledge of any Event of Default or Default, specifying the nature and period of existence thereof. Such accountants, however, shall not be liable to anyone by reason of their failure to obtain knowledge of any Event of Default or Default which would not be disclosed in the course of an audit conducted in accordance with generally accepted auditing standards. The Company also covenants that immediately after any Responsible Officer obtains knowledge of an Event of Default or Default, it will deliver to each Significant Holder an Officer's Certificate specifying the nature and period of existence thereof and what action the Company proposes to take with respect thereto. 5B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the request of the holder of any Securities that is a qualified institutional buyer, provide such holder, and any 17 qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Securities, except at such times as the Company is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this paragraph 5B, the term "qualified institutional buyer" shall have the meaning specified in Rule 144A under the Securities Act. 5C. INSPECTION OF PROPERTY. The Company will permit any Person designated by any Significant Holder in writing, at such Significant Holder's expense, to visit and inspect any of the properties of the Company and its Subsidiaries, to examine the corporate books and financial records of the Company and its Subsidiaries and make copies thereof or extracts therefrom and to discuss the affairs, finances and accounts of any of such corporations with the principal officers of the Company and its independent public accountants, all at such reasonable times and as often as such Significant Holder may reasonably request. 5D. COVENANT TO SECURE NOTES EQUALLY. The Company will, if it or any Subsidiary shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by the provisions of paragraph 6C(1) (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to paragraph 12(C)), make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any and all other Debt thereby secured so long as any such other Debt shall be so secured. 5E. MAINTENANCE OF PROPERTIES; INSURANCE. The Company will maintain or cause to be maintained in good repair, working order and condition all properties used or useful in the business of the Company and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof, all to the extent material to the Company 18 and its Subsidiaries taken as a whole. The Company will maintain or cause to be maintained, with financially sound and reputable insurers, insurance (including self-insurance, co-insurance, retainage and other similar arrangements) with respect to its properties and business and the properties and businesses of its Subsidiaries against loss or damage of the kinds customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such type and in such amounts as are customarily carried under similar circumstances by such other corporations. 5F. CORPORATE EXISTENCE, ETC. Subject to the provisions of paragraph 6C(5), the Company will at all times preserve and keep in full force and effect its corporate existence, and rights and franchises material to its business, and those of each of its Subsidiaries and will qualify, and cause each of its Subsidiaries to qualify, to do business in any jurisdiction where the failure to do so would have a material adverse effect on the financial condition or operations of the Company and its Subsidiaries taken as a whole, provided that the corporate existence of any such Subsidiary, -------- including, without limitation, any Subsidiary which was a subsidiary of AGPC prior to the Merger, may be terminated if, in the good faith judgment of the Board of Directors of the Company, such termination is in the best interests of the Company and could not reasonably be expected to have a Material Adverse Effect on the holders of the Notes or the Equity Securities. 5G. PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause each of its Subsidiaries to, all to the extent material to the Company and its Subsidiaries taken as a whole, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or significant interest accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien upon any of its properties or assets, provided that no -------- such charge or claim 19 need be paid if being contested in good faith by appropriate proceedings and if such accrual or other appropriate provision, if any, as shall be required by generally accepted accounting principles shall have been made therefor. 5H. COMPLIANCE WITH LAWS, ETC. The Company will comply and cause its Subsidiaries to comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, the noncompliance with which would materially and adversely affect the financial condition or operations of the Company and its Subsidiaries taken as a whole. 5I. TRUST. The Company will comply with the terms of the Trust Agreement. 6. NEGATIVE COVENANTS. From and after the Effective Date, so long as any Note shall remain unpaid, the Company covenants that: 6A. INTENTIONALLY OMITTED. 6B. DIVIDEND LIMITATION. The Company will not pay or declare any dividend on any class of its stock or make any other distribution on account of any class of its stock, or redeem, purchase or otherwise acquire, directly or indirectly, any shares of its stock (other than pursuant to the Merger Agreement, the Equity Incentive Plan or the Special Options) or make any payments of principal of, or retire, redeem, purchase or otherwise acquire, any Subordinated Debt (all of the foregoing being herein called "RESTRICTED PAYMENTS"), other than (i) dividends on Senior Preferred Stock payable in shares of such stock, (ii) payments of Intercompany Notes, (iii) issuances of shares of New Common issuable upon the exercise or conversion of shares of New Junior Preferred Stock in accordance with the New Restated Cer- tificate of Incorporation, (iv) pursuant to the Trust Agreement, (v) the surrender to and receipt by the Company of shares of New Junior Preferred Stock upon the exercise or conversion thereof pursuant to the New Restated Certificate of 20 Incorporation, (vi) payments of cash in lieu of issuing (A) fractional shares of New Common in connection with the exercise or conversion of shares of New Junior Preferred Stock or (B) fractional shares of Senior Preferred Stock in connection with the payment of dividends on such stock payable in shares of such stock, provided, that the cash -------- payments described in clauses (A) and (B) above (other than those made from the proceeds of any aggregation and sale of fractional shares) shall not aggregate more than $100,000 during any fiscal year of the Company and (vii) other Restricted Payments (other than in respect of New Common) during the calendar years set forth below, but only if, on the date such other Restricted Payments are declared (in the case of a dividend) or paid (in the case of other Restricted Payments), (x) no Default or Event of Default shall exist or shall result from such Restricted Payment and (y) the outstanding principal balance of the Notes has been reduced to the amount set forth opposite the calendar year described below in which such date occurs:
Outstanding Principal Calendar Year Balance of Notes ------------- --------------------- 1996 $30,300,000.00 1997 24,800,000.00 1998 19,300,000.00 1999 13,800,000.00 2000 8,300,000.00 2001 2,800,000.00 2002-2003 0.00
The term "STOCK" as used in this paragraph 6B shall include warrants and options to purchase stock. 6C. LIEN, DEBT, AND OTHER RESTRICTIONS. The Company will not and will not permit any Subsidiary to: 21 6C(1). LIENS. Create, assume or suffer to exist any Lien upon any of its properties or assets, whether now owned or hereafter acquired, except ------ (i) Liens for taxes, assessments, governmental levies or charges not yet due or which are being contested in good faith by appropriate proceedings and for which adequate reserves with respect thereto are maintained on the books of the Company or such Subsidiary in accordance with generally accepted accounting principles, (ii) other statutory Liens (including landlord liens) incidental to the conduct of its business or the ownership of its property and assets which were not or are not incurred in connection with the borrowing of money or the obtaining of advances or credit or guaranteeing the obligations of a Person, and which do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business, (iii) Liens on property or assets of a Subsidiary to secure Debt permitted under paragraph 6C(2)(iii), (iv) Liens on assets purchased from a seller other than the Company or a Subsidiary, which Liens are created at the time of acquisition of such property by the Company or any Subsidiary or within 10 days thereafter, to secure not more than 90% (or to secure Debt incurred by the Company or any Subsidiary to pay not more than 90%) of the purchase price thereof, but only to the extent the incurrence of such Debt is permitted by paragraph 6C(2)(vi), (v) any Lien renewing, extending or refunding any Lien permitted by clause (iv) above, provided that the principal -------- amount secured is not increased, and the Lien is not extended to other property of the Company or any Subsidiary, 22 (vi) Liens presently existing or hereinafter created in favor of the Purchasers or their Transferees or in favor of the Collateral Agent for the benefit of the banks now or hereafter parties to the BMO Credit Agreement and the Purchasers or their Transferees, including, without limitation, any Lien created by any of the Collateral Documents, (vii) Liens on real or personal property, arising out of Liens or claims of owners of oil and gas interests created by statute securing the purchase price payable for oil and gas purchased by the Company or any Subsidiary in the ordinary course of business; provided that all such Liens shall be discharged in -------- a timely fashion or contested in good faith by appropriate proceedings; provided, further, that any order or notice entered -------- ------- or given in said proceedings for execution of the enforcement of said Lien shall be stayed within 30 days from the date of entry of such order or the giving of such notice, (viii) other Liens incidental to the conduct of its business or the ownership of its property and assets which were not or are not incurred in connection with the borrowing of money or the obtaining of advances or credit (including those arising under contracts with the government of the United States or any State thereof or any local subdivision or contracting agency of any thereof, or pledges or deposits securing performance obligations under the natural gas sales contracts, which together do not exceed $2,000,000 in the aggregate, and pledges or deposits for the purpose of securing a stay or discharge of legal proceedings not exceeding $25,000), and which do not in the aggregate materially detract from the value of its property or assets, or materially impair the use thereof in the operation of its business, (ix) Liens granted by the Subsidiary Borrowers on all inventory, accounts receivables, cash, deposits, 23 instruments, investment securities and other personal property of the Subsidiary Borrowers, in each instance whether now owned or existing or hereafter issued, acquired or arising and all proceeds thereof (collectively, the "BMO COLLATERAL") to secure the obligations of the Company and the Subsidiary Borrowers pursuant to the BMO Credit Agreement; provided that the -------- outstanding amount of letters of credit secured by the BMO Collateral shall not at any time exceed $60,000,000 and the amount of advances secured by the BMO Collateral shall not at any time exceed $10,000,000, (x) Liens on property acquired by the Company or any Subsidiary which Liens were in place at the time such property was acquired, provided that such Liens were not granted in -------- contemplation of the property being so acquired, (xi) Liens created by the Indemnity and Holdback Agreement, dated December 15, 1991, by and among the Company, HD Energy Corporation ("HD Energy"), LG&E Energy Corp. and LG&E Energy Systems Inc., as modified by the Settlement Agreement made the 23rd day of September 1992, and (xii) Liens existing on the date hereof set forth on Schedule 6C(1). 6C(2). DEBT. Create, incur, assume or suffer to exist any Debt, except ------ (i) Debt of the Company represented by the Senior Secured Notes, (ii) Debt of the Company and the Subsidiary Borrowers under the BMO Credit Agreement, guarantees of the obligations of the Subsidiary Borrowers under the BMO Credit Agreement, and any amendments, modifications, renewals and extensions thereof permitted pursuant to paragraph 6G, 24 (iii) Debt of the Company to a Wholly Owned Subsidiary, of a Wholly Owned Subsidiary to the Company, of a Subsidiary Borrower to another Subsidiary Borrower, of a Pledged Subsidiary to another Pledged Subsidiary and of an Other Subsidiary to an Other Subsidiary, (iv) Debt of the Company and the Subsidiaries pursuant to the Collateral Documents, (v) Guaranties permitted by paragraph 6C(3)(vi) and guaranties and other arrangements permitted by paragraph 6C(9)(v)(y) and (z), (vi) Debt incurred to pay the purchase price of property acquired by the Company or any Subsidiary in an aggregate amount outstanding not at any time in excess of the sum of (x) 20% of the Total Capital of the Company on the Effective Date, after giving effect to the transactions contemplated hereby and to the Related Transactions, as such Total Capital is determined pursuant to a balance sheet of the Company as of the Effective Date delivered to the Purchasers not later than 60 days following the Effective Date and (y) 50% of the amount of all prepayments of the principal balance of the Notes made on or after the Effective Date other than such prepayments made with the proceeds of Asset Sales pursuant to paragraph 4A(ii), and any refundings or refinancings of any such Debt, provided, however, that (A) all -------- ------- such Debt shall be without recourse to the Company or any Subsidiary or any of their respective assets (other than the property being acquired), (B) the amount of any such Debt shall not exceed the lesser of 90% of (i) the cost of the property so acquired and (ii) the fair value of such property and (C) the amount of such Debt that may be outstanding pursuant to clause (y) above shall be reduced by the amount of Debt outstanding pursuant to subparagraph (vii) below, 25 (vii) Debt incurred by the Company in an aggregate amount outstanding not at any time in excess of 50% of the aggregate amount of principal prepayments of the Notes pursuant to paragraph 4B, provided, that (A) all such Debt shall be borrowed -------- from BMO and shall be either nonsecured or secured only by Liens permitted under paragraph 6C(1)(vi), and (B) the amount of Debt that may be outstanding pursuant to this subparagraph (vii) shall be reduced to the extent Debt is outstanding pursuant to clause (y) of subparagraph (vi) above as a result of principal payments pursuant to paragraph 4B, and (viii) Debt incurred by the Company in an aggregate amount outstanding not at any time in excess of the amount by which the principal balance of the Notes is prepaid with the proceeds of Asset Sales. 6C(3). LOANS, ADVANCES, INVESTMENTS AND CONTINGENT LIABILITIES. Make or permit to remain outstanding any loan or advance to, or extend credit (other than credit extended in the normal course of business to any Person who is not an Affiliate of the Company) to, or guarantee, endorse or otherwise be or become contingently liable, directly or indirectly, in connection with the obligations, stock or dividends of, or own, purchase or acquire (other than pursuant to the Merger Agreement) any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person, except ------ that the Company or any Subsidiary may (i) own the stock of Subsidiaries (including, without limitation, Subsidiaries which were subsidiaries of AGPC immediately prior to the Merger, Beck & Root Fuel Company and Midwest Energy Companies, Inc., in each case in the amounts set forth on Schedule 6C(3), (ii) acquire and own stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to the Company or any Subsidiary, 26 (iii) own, purchase or acquire (a) certificates of deposit of commercial banks organized under the laws of the United States (having capital resources in excess of $250,000,000) and commercial paper rated A-1 by Standard and Poor's Corporation or P-1 by Moody's Investors Services, Inc., and (b) obligations of the United States Government or any agency thereof, and obligations guaranteed by the United States Government, in each case due within one year from the date of purchase and payable in the United States in United States dollars, (iv) endorse negotiable instruments for collection or deposit in the ordinary course of business, (v) make or permit to remain outstanding travel and other like advances to officers and employees in the ordinary course of business, in an aggregate amount not to exceed $50,000 at any time outstanding, (vi) make and maintain the Guarantees described in paragraph 6C(2)(ii) and the Guarantees described in Schedule 6C(3), (vii) hedge its risk positions relating to the operations of its natural gas marketing business, (viii) make or suffer to exist loans to, or investments in, Beck & Root Fuel Company in an aggregate amount outstanding not to exceed at any time $2,000,000, (ix) make or permit ordinary course of business investments by the Company or any Subsidiary in partnerships or joint ventures holding title to pipe lines and gathering systems or gas processing plants and loans and advances by the Company or any Subsidiary to such partnerships or joint ventures provided that such partnerships or joint ventures shall at no time incur Debt for borrowed money or for the deferred purchase price of property for which the Company or 27 any Subsidiary could under any circumstances be liable except for Debt held by the partners or joint ventures in proportion to their equity interests in the partnership or joint venture in question, (x) permit to make and remain outstanding the Debt permitted by paragraph 6C(2)(iii), (xi) make or permit the arrangements permitted by paragraph 6C(9)(v)(y) and (z), and (xii) in addition to advances relating to Debt permitted by paragraph 6C(2)(iii), make or permit advances by the Company to Wholly-Owned Subsidiaries arising from the Company providing administrative services to such Wholly-Owned Subsidiaries or temporarily paying expenses arising in the ordinary course of business of any Wholly-Owned Subsidiary which are not made to maintain the net worth of such Wholly-Owned Subsidiary so long as each such Wholly-Owned Subsidiary is invoiced monthly by the Company and makes payments in full of the invoiced amount within 30 days after the date of such invoice. 6C(4). INTENTIONALLY OMITTED. 6C(5). MERGER AND SALE OF ASSETS. Other than the Merger, the HEPSI Merger, the contract described in clause (x)(A) of the proviso to paragraph 6C(11) and transfers permitted under paragraphs 6C(2), 6C(3) and 6C(7), merge or consolidate with or into any other Person or convey, lease, transfer or otherwise dispose of any of its assets to any Person, except that ------ (i) any Wholly-Owned Subsidiary may merge with the Company (provided that the Company shall be the continuing or surviving corporation), any Subsidiary Borrower may merge with any other Subsidiary Borrower, any Pledged Subsidiary may merge with any other Pledged Subsidiary and any Other Subsidiary may merge with any Other Subsidiary, 28 (ii) any Wholly-Owned Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to the Company, any Subsidiary Borrower may sell, lease, transfer or otherwise dispose of any of its assets to another Subsidiary Borrower, any Pledged Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets to another Pledged Subsidiary and any Other Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets to any Other Subsidiary, (iii) the Company or any Subsidiary may sell inventory in the ordinary course of business consistent with past practices, (iv) the Company or any Subsidiary may engage in Asset Sales in which it receives cash consideration in an amount equal to the fair value (as determined in good faith by the Board of Directors of the Company) at the time of such Asset Sale of the assets sold to the extent the cash consideration net of taxes and other reasonable expenses incurred in connection therewith does not exceed (x) $5,000,000 in the aggregate during the first 12 full calendar months following the Effective Date or (y) $10,000,000 in the aggregate from and after the Effective Date; provided, however, that the Company or any Subsidiary may engage -------- ------- in Asset Sales for cash consideration in excess of the amounts set forth in clauses (x) and (y) above if the amount of such excess is, upon receipt thereof, deposited with a designee of the Purchasers pursuant to a cash collateral agreement in the form of Exhibit H, and subsequently used by the Company or such Subsidiary within 90 days following receipt thereof (x) to prepay the Notes as set forth in paragraph 4A(ii) or (y) to acquire assets useful to the Company or such Subsidiary consistently with paragraph 6F; provided, further, that, unless the Company shall -------- ------- forward to the Purchasers a certified resolution of its Board of Directors that the Company intends to reinvest such proceeds as set forth in clause (y) above, the Company shall apply such proceeds to 29 prepayment of the Notes immediately upon receipt thereof; provided, further that the Company or any Subsidiary acquiring -------- ------- assets with the proceeds of any Asset Sales permitted under the first proviso to this paragraph 6C(5)(iv) shall pledge to the ------- Purchasers the stock of any Subsidiary formed to hold such assets, and (v) the Company may merge or consolidate or sell, lease or otherwise transfer substantially all of its assets if (a) the Liens under the Collateral Documents are unaffected thereby or are replaced to the satisfaction of the Purchasers with essentially equivalent Liens; (b) either the Company is the surviving or resulting Person of such merger or consolidation or the surviving or resulting Person or the transferee (if other than the Company) is a corporation having substantially all of its assets in the United States or Canada and conducting substantially all of its business in the United States or Canada; (c) the surviving or resulting Person or the transferee (if not the Company) assumes by supplemental agreement delivered to the Purchasers, in form and substance satisfactory to the Purchasers, all of the obligations of the Company under this Agreement, the Trust Agreement, the Registration Rights Agreement and each Collateral Document; (d) the Purchasers receive opinions of counsel to the Company (or such other Person) satisfactory in form and substance to the Purchasers; (e) after giving effect to such merger, consolidation or transfer, the surviving or resulting Person or the transferee is able to incur at least $1 of additional Debt without giving rise to an Event of Default or Default; and (f) immediately after giving effect to such merger, consolidation or transfer, no Event of Default or Default would be continuing. 6C(6). LEASE RENTALS. Enter into or permit to remain in effect, any agreement to rent or lease (as lessee) any real or personal property; provided, however, that the Company or any Subsidiary may -------- ------- enter into or permit to remain in effect any such 30 lease (other than a lease that would be required to be capitalized on the books of the Company or such Subsidiary) if the aggregate minimum annual payments under all such leases for any fiscal year do not exceed 10% of the Net Worth of the Company as of the last day of the previous fiscal year. 6C(7). SALE AND LEASE-BACK. Enter into any arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by the Company or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Company or any Subsidiary to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or rental obligations of the Company or any Subsidiary; provided, however, that the Company or any -------- ------- Subsidiary may enter into any such arrangement if the aggregate annual rental obligations under all such arrangements entered into after the Effective Date for any fiscal year do not exceed 10% of the Net Worth of the Company as of the last day of the previous fiscal year. 6C(8). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or discount (other than to the extent of finance and interest charges included therein) or otherwise sell for less than face value thereof, any of its notes or accounts receivable except notes or accounts receivable the collection of which is doubtful in accordance with generally accepted accounting principles. 6C(9). CERTAIN CONTRACTS. Except as set forth on Schedule 6C(9), enter into or be party to: (i) any contract providing for the making of loans, advances or capital contributions to any Person or for the purchase of any property from any Person, in each case in order to enable such Person to maintain working capital, net worth or any other balance sheet condition or to pay debts, 31 dividends or expenses, except as permitted by the provisions of paragraph 6C(3), or (ii) any contract for the purchase of materials, supplies or other property or services if such contract (or any related document) requires that payment by the Company or any Subsidiary for such materials, supplies or other property or services shall be made regardless of whether or not delivery of such materials, supplies or other property or services is ever made or tendered (other than contracts for firm transportation of natural gas entered into in the ordinary course of business pursuant to which aggregate annual charges payable by the Company and its Subsidiaries do not exceed $4,000,000), or (iii) any contract to rent or lease (as lessee) any real or personal property if such contract (or any related document) provides that the obligation to make payments thereunder is absolute and unconditional under conditions not customarily found in commercial leases then in general use or requires that the lessee purchase or otherwise acquire securities or obligations of the lessor, or (iv) any contract for the sale or use of materials, supplies or other property, or the rendering of services, if such contract (or any related document) requires that payment to the Company or any Subsidiary for such materials supplies or other property, or the use thereof, or payment for such services, shall be subordinated to any indebtedness (of the purchaser or user of such materials, supplies or other property or the Person entitled to the benefit of such services) owed or to be owed to any Person, or (v) any other contract which, in economic effect, is substantially equivalent to a guarantee, except as permitted pursuant to the provisions of paragraphs 6C(1), 6C(2) or 6C(3) and except in any such case (x) by the endorsement of negotiable instruments for deposit or collection or similar 32 transactions in the ordinary course of business, (y) guarantees by the Company or any Subsidiary of the contractual obligations of any Subsidiary (not involving borrowings), and letters of credit issued pursuant to the BMO Credit Agreement and (z) surety bonds, performance bonds, other letters of credit or guarantees posted as security for performance of commercial arrangements (not involving any borrowings) or similar contracts entered into in the ordinary course of business, not to exceed $4,000,000 in the aggregate at any time. 6C(10). PRIORITY DEBT. Create, assume or incur, or in any manner become or be liable in respect of, indebtedness for money borrowed, advances made or goods purchased (other than Liens permitted under paragraph 6C(1)(vii) and Debt permitted under paragraph 6C(2)(ii)), if the lender of such money or the Person making such advances or the vendor of such goods (or any Person who guarantees or otherwise becomes surety for the whole or any part of such indebtedness or acquires any right or incurs any obligation to become, either immediately or upon the occurrence of some future contingency, the owner of the whole or any part thereof) shall have any right, by reason of statute (including, without limitation, 31 U.S.C.A. section 3713), or otherwise, to have any claim in respect of such indebtedness first satisfied out of the general assets of the Company or such Subsidiary in priority to the claims of its general creditors. 6C(11). TRANSACTIONS WITH AFFILIATES. Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise deal with, in the ordinary course of business or otherwise (i) except as contemplated by the Merger Agreement, the New Restated Certificate of Incorporation and the Registration Rights Agreement, any Affiliate (except as specifically permitted hereunder), (ii) any Person owning, beneficially or of record, directly or indirectly, either individually or together with all other Persons to whom such Person is related by blood, adoption or marriage, stock of the Company aggregating 3% or more of any 33 class of equity securities issued by the Company or any Subsidiary, other than a Purchaser, except as contemplated by the Merger Agreement, the New Restated Certificate of Incorporation and the Registration Rights Agreement, or (iii) any Person related by blood, adoption or marriage to any Person described or coming within the provisions of clause (i) or (ii) of this paragraph 6C(11) other than, in the case of clauses (i), (ii) and (iii) above, on terms that are no less favorable to the Company or such Subsidiary than would be obtained in a transaction negotiated at arm's length from a Person not an Affiliate; provided, however, that the Company may (x) enter into, -------- ------- at arm's length, (A) gas marketing and other arrangements related to natural gas and natural gas liquids, including, without limitation, a gas marketing agreement with SFER and Santa Fe Energy Operating Partners, L.P., in substantially the form annexed to the Merger Agreement, and (B) other arrangements not to exceed at any time outstanding $2,000,000 in the aggregate, with Beck & Root Fuel Company or as otherwise permitted under paragraph 6C(3), upon terms no less favorable to the Company than could be obtained if no relationship existed, (y) pay compensation and other employee related benefits to each of T. K. Hendrick and J. Michael Adcock in connection with his former employment with the Company and (z) pay fees and expenses to Bank of Oklahoma, N.A. in payment of Bank of Oklahoma's services as recordkeeper of the Company's employee stock ownership/401K plan. 6C(12). TRANSFER OF ASSETS TO SUBSIDIARIES. Transfer any assets to any Subsidiary other than as permitted pursuant to paragraphs 6C(2), 6C(3) and 6C(5). 6C(13). SUBSIDIARY DIVIDEND RESTRICTIONS. Enter into, or be otherwise subject to, any contract or agreement (including its certificates or articles of incorporation) which limits the amount of, or otherwise imposes restrictions on the payment of, dividends by any Subsidiary, other than the BMO Credit Agreement. 6D. ISSUANCE OF STOCK BY SUBSIDIARIES; CERTAIN CHANGES. (a) The Company will not permit any Subsidiary (either directly, 34 or indirectly by the issuance of rights or options for, or securities convertible into or exercisable for, such shares) to issue, sell or otherwise dispose of any shares of any class of the stock of such Subsidiary (other than directors' qualifying shares). (b) Except in connection with any exercises, exchanges, redemptions or conversions otherwise permitted hereby or as otherwise contemplated hereby, the Company (i) will not, and will not permit any Subsidiary to, make any changes in its capital structure, its certificate of incorporation or by-laws (except in connection with the issuance of additional shares of any class or series of capital stock, whether such class or series is now existing or hereafter created, and exercises, exchanges, redemptions or conversions of any such shares permitted under paragraph 6B) or (ii) will not, and will not permit any Subsidiary to, make any changes in any business objective, purpose, or operations which might reasonably be expected to adversely affect the repayment of the obligations hereunder or have a Material Adverse Effect. 6E. COMPLIANCE WITH ERISA. The Company will not, and will not permit any ERISA Affiliate to: (i) engage in any transaction in connection with which the Company or any of its Subsidiaries would be subject to either a material civil penalty assessed pursuant to section 502(i) of ERISA or a material tax imposed by section 4975 of the Code; (ii) terminate or partially terminate any Plan if such termination would result in liability of the Company or an ERISA Affiliate to the PBGC in an amount exceeding $50,000; (iii) fail to make full payment when due of all amounts which the Company, any of its Subsidiaries or an ERISA Affiliate is required to contribute to any Plan or Multiemployer Plan under section 302 of ERISA and section 35 412 of the Code, or permit to exist any accumulated funding deficiency, whether or not waived, with respect to any such Plan; (iv) fail to make any payments when due to any Multiemployer Plan which the Company or any ERISA Affiliate is required to make under any agreement relating to such Multiemployer Plan or any law pertaining thereto; (v) adopt or become obligated to contribute to any new Multiemployer Plan or other Plan subject to Section 412 of the Code; (vi) adopt or become obligated to contribute to any "employee welfare benefit plan" as defined under Section 3(l) of ERISA that provides health or life insurance to participants after their termination of employment (except those benefits required to be provided under Section 4980B of the Code or where the obligation to contribute is not material); or (vii) amend or permit an ERISA Affiliate to amend a Plan resulting in an increase in current liability for the plan year such that either the Company or the ERISA Affiliate is required to provide security in a material amount to such plan under Section 401(a)(29) of the Code. The Company agrees (x) upon request by the Significant Holders, to request a current statement of withdrawal liability from each Multiemployer Plan to which the Company or an ERISA Affiliate contributes or to which the Company or an ERISA Affiliate has an obligation to contribute and (y) to transmit a copy of such statement to each Significant Holder, so long as such Significant Holder or its nominee shall be the holder of any Notes, and to each other Significant Holder of any Note, within 15 days after the Company receives the same. 36 6F. MAINTENANCE OF BUSINESS. The Company will not and will not permit any Subsidiary to engage in any business other than the business currently engaged in by the Company and its Subsidiaries and business ancillary thereto, including, without limitation, the gathering, marketing, sales, purchasing, storing, transportation and processing of natural gas, natural gas liquids and petroleum products and the hedging of risk positions related to the operation of a natural gas marketing business. 6G. MODIFICATION OF MATERIAL AGREEMENTS. The Company will not, and will not permit any of its Subsidiaries to, alter, amend, modify, rescind, terminate or waive any of their respective rights under, or take or omit to take any action, which act or omission would constitute a material default or an event of default pursuant to, or non-compliance with any contract, lease, mortgage, deed of trust or instrument to which it is a party or by which it or any of its property is bound, or any document creating a Lien; provided, however, -------- ------- that (i) with respect to any contractual obligation other than this Agreement, the Registration Rights Agreement, the Trust Agreement, the Notes, the Collateral Documents and the BMO Credit Agreement, the Company and its Subsidiaries may do so if the consequences thereof would not have a Material Adverse Effect and (ii) with respect to the BMO Credit Agreement, without the prior written consent of the Required Holders, neither the Company nor any Subsidiary a party thereto will amend or modify any provision which amendment or modification would have a Material Adverse Effect (including, without limitation, any such amendment or modification which would permit the aggregate amount of revolving credit in the form of loans to the Company that may be outstanding at any time thereunder to exceed $10,000,000), provided, that the Company may enter into any -------- modification or amendment of the BMO Credit Agreement which would (a) increase the aggregate amount of revolving credit in the form of letters of credit that may be issued thereunder by up to $10,000,000, if such increase is for the reasonable working capital needs of the Company and its Subsidiaries, or (b) without limiting increases permitted by clause (a) above, would increase the amount of Debt 37 (including letters of credit) that may be incurred thereunder by the amount of Debt permitted to be incurred from time to time under paragraph 6C(2)(vii); provided, further, that in the event of any -------- ------- breach or event of default by a Person other than the Company or any of its Subsidiaries under any such material contractual obligation, the Company shall promptly notify the Purchasers of any such breach or event of default. 7. EVENTS OF DEFAULT. 7A. ACCELERATION. If any of the following events shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise): (i) the Company defaults in the payment of any principal of or interest on any Note when the same shall become due, either by the terms thereof or otherwise as herein provided and such default continues for more than one (1) day after the date due; or (ii) the Company or any Subsidiary defaults (whether as primary obligor or as guarantor or other surety) in any payment of principal of or interest on any other obligation for money borrowed (or any Capitalized Lease Obligation, any obligation under a conditional sale or other title retention agreement, any obligation issued or assumed as full or partial payment for property whether or not secured by a purchase money mortgage or any obligation under notes payable or drafts accepted represent- ing extensions of credit) beyond any period of grace provided with respect thereto, or the Company or any Subsidiary fails to perform or observe any other agreement, term or condition contained in any agreement under which any such obligation is created (or if any other event thereunder or under any such agreement shall occur and be continuing) and the effect of such failure or other event is to cause, or to permit the holder or holders of such obligation (or a trustee on behalf 38 of such holder or holders) to cause, such obligation to become due (or to be repurchased by the Company or any Subsidiary) prior to any stated maturity, provided that the aggregate amount of all -------- obligations as to which such a payment default shall occur and be continuing or such a failure or other event causing or permitting acceleration (or resale to the Company or any Subsidiary) shall occur and be continuing exceeds $1,000,000; or (iii) any representation or warranty made by the Company herein, in any Collateral Document or by the Company or any of its officers in any writing furnished to the Purchasers in connection with or pursuant to this Agreement shall be false in any material respect on the date as of which made and shall continue to be false 30 days after the Company receives notice thereof from the Purchasers; or (iv) the Company fails to perform or observe (a) any term, covenant or agreement contained in paragraph 5A and such failure shall not be remedied with 15 days, or (b) any term, covenant or agreement contained in paragraph 6B, 6C(1) through 6C(13) (other than through the imposition of a non-consensual Lien by any Person not a Subsidiary or Affiliate of the Company), 6D, or 6G and such failure shall not be remedied within one Business Day or (c) any other agreement, term, covenant or condition contained herein or in any Collateral Document or the Registration Rights Agreement and such failure shall not be remedied within 30 days after notice from the Purchasers; or (v) the Company or any Subsidiary makes an assignment for the benefit of creditors or is generally not paying its debts as such debts become due; or (vi) any decree or order for relief in respect of the Company or any Subsidiary is entered under any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar 39 law, whether now or hereafter in effect (each, a "BANKRUPTCY LAW"), of any jurisdiction; or (vii) the Company or any Subsidiary petitions or applies to any tribunal for, or consents to, the appointment of, or taking possession by, a trustee, receiver, custodian, liquidator or similar official of the Company or any Subsidiary, or of any substantial part of the assets of the Company or any Subsidiary, or commences a voluntary case under the Bankruptcy Law of the United States or any proceedings relating to the Company or any Subsidiary under the Bankruptcy Law of any other jurisdiction; or (viii) any such petition or application is filed, or any such proceedings are commenced, against the Company or any Subsidiary and the Company or such Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein, or an order, judgment or decree is entered appointing any such trustee, receiver, custodian, liquidator or similar official, or approving the petition in any such proceedings, and such order, judgment or decree remains unstayed and in effect for more than 60 days; or (ix) any order, judgment or decree is entered in any pro- ceedings against the Company decreeing the dissolution of the Company and such order, judgment or decree remains unstayed and in effect for more than 60 days; or (x) any order, judgment or decree is entered in any pro- ceedings against the Company or any Subsidiary decreeing a split- up of the Company or such Subsidiary which requires the divestiture of assets representing a substantial part, or the divestiture of the stock of a Subsidiary whose assets represent a substantial part, of the consolidated assets of the Company and its Subsidiaries (determined in accordance with generally accepted accounting principles) or which requires the divestiture of assets, or stock of a Subsidiary, which shall have contributed a substantial part of the 40 consolidated net income of the Company and its Subsidiaries (determined in accordance with generally accepted accounting principles) for any of the three fiscal years then most recently ended, and such order, judgment or decree remains unstayed and in effect for more than 60 days; or (xi) any judgment or order or judgments or orders for the payment of money in an amount in excess of $1,000,000 in the aggregate is rendered against the Company or any Subsidiary and within ten (10) days (or, where such judgment or order is covered by insurance and the insurer has admitted liability, 30 days) after entry thereof, such judgment or order is not discharged or execution thereof vacated, bonded or stayed pending appeal; or (xii) the Company or any ERISA Affiliate becomes subject to withdrawal liability or liability to the PBGC (other than for unpaid annual premiums not yet due) in an amount exceeding $500,000; or (xiii) any Collateral Document shall cease to create a valid and perfected security interest with such priority as is contemplated by such document in any of the collateral purported to be covered thereby or the Company or any Subsidiary shall so state in writing except with respect to any bank account or disbursing account of the Company; (xiv) the Company defaults in the performance of any provision of the Trust Agreement other than Sections 9.04 and 10.02(a) thereof or defaults in the performance of Section 9.04 or 10.02(a) of the Trust Agreement for a period of 30 days or more; then (a) if such event is an Event of Default specified in clause (i) of this paragraph 7A, the holder of any Note (other than the Company or any of its Subsidiaries or Affiliates) may at its option, by notice in writing to the Company, declare such Note to be, and such Note shall thereupon be and become, immediately due 41 and payable at par together with interest accrued thereon, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company, (b) if such event is an Event of Default specified in clause (vi), (vii) or (viii) of this paragraph 7A with respect to the Company, all of the Notes at the time outstanding shall automatically become immediately due and payable at par together with interest accrued thereon, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Company, and (c) if such event is not an Event of Default specified in clause (i), (vi), (vii) or (viii) of this paragraph 7A with respect to the Company, the Required Holder(s) may at its or their option, by notice in writing to the Company, declare all of the Notes to be, and all of the Notes shall thereupon be and become, immediately due and payable together with interest accrued thereon, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. 7B. RESCISSION OF ACCELERATION. At any time after any or all of the Notes shall have been declared immediately due and payable pursuant to paragraph 7A, the Required Holder(s) may, by notice in writing to the Company, rescind and annul such declaration and its consequences if (i) the Company shall have paid all overdue interest on the Notes and interest on such overdue interest at the rate specified in the Notes which shall have become due other than by reason of such declaration, (ii) the Company shall not have paid any amounts which have become due solely by reason of such declaration, (iii) all Events of Default and Defaults, other than non-payment of amounts which have become due solely by reason of such declaration, shall have been cured or waived pursuant to paragraph 12C, and (iv) no judgment or decree shall have been entered for the payment of any amounts due pursuant to the Notes or this Agreement. No such rescission or annulment shall extend to or affect any subsequent Event of Default or Default or impair any right arising therefrom. 7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be declared immediately due and payable pursuant to 42 paragraph 7A or any such declaration shall be rescinded and annulled pursuant to paragraph 7B, the Company shall forthwith give written notice thereof to the holder of each Note at the time outstanding. 7D. OTHER REMEDIES. If any Event of Default or Default shall occur and be continuing, the holder of any Note may proceed to protect and enforce its rights under this Agreement and such Note by exercising such remedies as are available to such holder in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or other agreement contained in this Agreement or in aid of the exercise of any power granted in this Agreement. No remedy conferred in this Agreement upon the holder of any Note is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or now or hereafter existing at law or in equity or by statute or otherwise. 8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents, covenants and warrants as of the Effective Date, after giving effect to the Merger, as follows: 8A. ORGANIZATION; AUTHORITY; ENFORCEABILITY. Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own and operate its properties and to carry on its business as presently conducted, and in the case of the Company and its Subsidiaries (to the extent a party thereto), to enter into and perform all of its obligations under this Agreement, the Registration Rights Agreement, the Trust Agreement and the Collateral Documents, to issue and deliver, and perform all of its obligations under, the Securities and to consummate each of the Related Transactions. Each of the Company and its Subsidiaries is duly licensed or qualified to do business as a foreign corporation in each state where the failure to be so licensed or qualified would have a material adverse effect on the 43 financial condition or operations of the Company and its Subsidiaries taken as a whole and has all corporate power, material licenses, franchises and other governmental authorizations and approvals necessary to carry on its present business, with respect to which the failure to possess would have a material adverse effect on the financial condition or operations of the Company and its Subsidiaries taken as a whole. Each of this Agreement is, the Registration Rights Agreement and the Collateral Documents upon execution and delivery will be, and the Notes when issued and delivered hereunder will be, legal, valid, binding and enforceable obligations of the Company and its Subsidiaries party thereto. Each Subsidiary of the Company (after giving effect to the Merger and the HEPSI Merger) is listed on Schedule 6C(3) under the heading "Subsidiaries of Hadson Corporation." 8B. FINANCIAL STATEMENTS. The Company has furnished each Purchaser with the following financial statements, identified by a principal financial officer of the Company: (i) a consolidated balance sheet of the Company and its Subsidiaries as at December 31 in each of the years 1990 to 1992, inclusive, and consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for each such year, all reported on by Price Waterhouse; and (ii) a consolidating and consolidated balance sheet of the Company and its Subsidiaries as at September 30 in each of the years 1992 and 1993 and consolidated statements of income and cash flows for the nine-month period ended on each such date, prepared by the Company. Such financial statements (including any related schedules and/or notes) are true and correct in all material respects (subject, as to interim statements, to changes resulting from audits and year-end adjustments), have been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods involved (except as otherwise stated therein or in the notes, if any, thereto) and show all liabilities, direct and contingent, of the Company and its Subsidiaries required to be shown in accordance with such principles. The balance sheets fairly present the condition of the Company and its Subsidiaries 44 as at the dates thereof, and the statements of income and cash flows fairly present the results of the operations of the Company and its Subsidiaries and their cash flows for the periods indicated. No event has occurred since December 31, 1992 which has had or could have a Material Adverse Effect other than as set forth on Schedule 3A(6). 8C. ACTIONS PENDING. Except as otherwise set forth on Schedule 8C, there is no action, suit, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any properties or rights of the Company or any of its Subsidiaries, by or before any court, arbitrator or administrative or governmental body which might result in a Material Adverse Effect. 8D. OUTSTANDING DEBT. Neither the Company nor any of its Subsidiaries has outstanding any Debt except as permitted by paragraph 6C(2) or as set forth on Schedule 8D. Except as set forth on Schedule 8D, there exists no default under the provisions of any instrument evidencing such Debt or of any agreement relating thereto. 8E. TITLE TO PROPERTIES. The Company and each of its Subsidiar- ies has good and indefeasible title to its respective real properties (other than properties which it leases) and good title to all of its other respective properties and assets except where failure to have such title to such real property, property or assets would not have a Material Adverse Effect, including the properties and assets reflected in the balance sheet as at December 31, 1992 referred to in paragraph 8B (other than properties and assets disposed of in the ordinary course of business and any other assets and properties disposed of since such date and described on Schedule 8E hereto), subject to no Lien of any kind except Liens permitted by paragraph 6C(1). All leases necessary in any material respect for the conduct of the respective businesses of the Company and its Subsidiaries are valid and subsisting and are in full force and effect. 45 8F. TAXES. The Company and each of its Subsidiaries has each filed all federal, state and other income tax returns which, to the knowledge of the Responsible Officers of the Company, are required to be filed by it and each has paid all taxes as shown on such returns and on all assessments received by it to the extent that such taxes have become due, except such taxes as are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting princi- ples. 8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement or subject to any charter or other corporate restriction which materially and adversely affects the business, property or assets, or financial condition of the Company and its Subsidiaries taken as a whole. Neither the execution nor delivery of this Agreement, the Registration Rights Agreement, the Trust Agreement or any Collateral Document nor the performance of any Related Transaction, nor the issuance and delivery of the Securities, nor fulfillment of nor compliance with the terms and provisions hereof and thereof will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien upon (other than Liens in favor of the Purchasers, Liens in favor of BMO and Liens in favor of the Collateral Agent) any of the properties or assets of the Company or any of its Subsidiaries pursuant to, the New Restated Certificate of Incorporation or the By-laws or the charter or bylaws of any of its Subsidiaries, any award of any arbitrator or any agree- ment (including any agreement with stockholders), instrument, order, judgment, decree, statute, law, rule or regulation to which the Company or any of its Subsidiaries is subject except as set forth in the agreements listed in Schedule 8G attached hereto. Neither the Company nor any of its Subsidiaries is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto, or any other contract or agreement (including its charter) in each 46 case which limits the amount of, or otherwise imposes restrictions on the incurring of, Debt of the Company of the type to be evidenced by the Notes except as set forth in the agreements listed in Schedule 8G attached hereto. 8H. OFFERING OF SECURITIES. A registration statement on Form S- 4 with respect to the Merger has been prepared by the Company in conformity in all material respects with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder and filed with the Securities and Exchange Commission and has become effective. Such registration statement may have been amended prior to the Date of Closing, any such amendment was so prepared and filed, and any such amendment filed prior to the Date of Closing but after the effective date of such registration statement has become effective. No stop order suspending the effectiveness of such registration statement has been issued and no proceeding for that purpose has been instituted or, to the knowledge of the Company, threatened by the Securities and Exchange Commission. 8I. USE OF PROCEEDS. Neither the Company nor any Subsidiary owns or has any present intention of acquiring any "margin stock" as defined in Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve System ("MARGIN STOCK"). The Exchange Notes are being issued in exchange for the Existing Notes and the Merger Notes and the Equity Securities will be issued upon Conversion of the Existing Class C Common and the Existing Senior Preferred. None of the proceeds of the Notes will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any margin stock or for the purpose of maintaining, reducing or retiring any Indebtedness which was originally incurred to purchase or carry any stock that is currently a margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of such Regulation G. Neither the Company nor any agent acting on its behalf has taken or will take any action which might cause this Agreement or the 47 Notes to violate Regulation G, Regulation T or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act, in each case as in effect now or as the same may hereafter be in effect. 8J. ERISA. No accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC (other than for unpaid annual premiums not yet due) has been or is expected by the Company or any ERISA Affiliate to be incurred with respect to any Plan (other than a Multiemployer Plan) by the Company, any Subsidiary or any ERISA Affiliate. Neither the Company, any Subsidiary nor any ERISA Affiliate has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan. Each of the execution and delivery of this Agreement, the performance of the Related Transactions, the Trust Agreement, the Registration Rights Agreement and the Collateral Documents, the performance of the Related Transactions and the issuance and delivery of the Securities will be exempt from, or will not involve any transaction which is subject to, the prohibitions of section 406 of ERISA and will not involve any transaction in connection with which a penalty could be imposed under section 502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code. The representation by the Company in the immediately preceding sentence is made in reliance upon and subject to the accuracy of each Purchaser's representation in paragraph 9B. Schedule 8J lists each Plan of the Company and of each Subsidiary that is subject to ERISA except for those Plans which are defined in Section 3(1) of ERISA and which do not provide health or life insurance coverage after termination of employment (except for benefits required to be provided under Section 4980B of the Code). 8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any Subsidiary, nor any of their respective businesses or properties, nor any relationship between the 48 Company or any Subsidiary and any other Person, nor any circumstance in connection with the offering, issuance or delivery of the Securities is such as to require any authorization, consent, approval, exemption or other action by or notice to or filing with any court or administrative or governmental or regulatory body (other than (i) the filing of any required financing statements and required continuations thereof, (ii) with respect to the registration statement prepared and filed by the Company with respect to the Merger pursuant to the Securities Act and the Proxy Statement - Prospectus and any amendments or supplements thereto and related filings pursuant to applicable state securities laws, and any amendments or supplements thereto, (iii) routine filings after the Effective Date with the Securities and Exchange Commission and/or state Blue Sky authorities and (iv) those authorizations, consents, approvals, exemptions, notices or filings which have been obtained or made and are in full force and effect, copies of which have been provided to the Purchasers) in connection with the execution and delivery of this Agreement, the Hadson Security Agreement, the Pledge Agreement, the Trust Agreement or the Registration Rights Agreement, the offering, issuance or delivery of the Securities, the performance of the Related Transactions or (except as specifically contemplated by the Registration Rights Agreement and except for filings required under the HSR Act (as defined below) in connection with the deliveries of shares of New Common to the Purchasers pursuant to the Trust Agreement) fulfillment of or compli- ance with the terms and provisions hereof or of the Securities. The Company shall make any filing that may be required (or reasonably requested by a Purchaser or a Transferee) pursuant to the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR ACT"), in connection with the Related Transactions. 8L. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries and all of their respective properties and facilities have complied at all times and in all respects with all federal, state, local and regional statutes, laws, ordinances and judicial or administrative orders, judgments, rulings and 49 regulations relating to protection of the environment except, in any such case, where failure to comply would not result in a material adverse effect on the business, condition, financial or otherwise, or operations of the Company and its Subsidiaries taken as a whole. 8M. DISCLOSURE. Neither this Agreement nor any other document, certificate or statement furnished to any Purchaser by or on behalf of the Company in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. There is no fact peculiar to the Company or any of its Subsidiaries which materially adversely affects or in the future may (so far as the Company can now foresee) materially adversely affect the business, property or assets, or financial condition of the Company and its Subsidiaries, taken as a whole, and which has not been set forth in this Agreement or in the other documents, certificates and statements furnished to each Purchaser by or on behalf of the Company prior to the date hereof in connection with the transactions contemplated hereby. The Proxy Statement - Prospectus did not, as of the date thereof or as of the date of any supplement thereto distributed by the Company prior to the Date of Closing, contain any untrue statement of a material fact or omit to state any material fact required to be stated in order to make the statements therein, in the light of the circumstances under which such statements were made, not misleading. The projections of the Company and its Subsidiaries provided to the Purchasers are reasonably based on the assumptions set forth therein and the best information available to the officers of the Company at the time of preparation thereof. To the best knowledge of the Company, no facts exist which would result in any material adverse change in any of such projections. 8N. CAPITAL STOCK AND RELATED MATTERS. On the Date of Closing and after giving effect to the transactions contemplated hereby and to the Related Transactions, (i) the authorized capital stock of the Company will consist of 60,000,000 shares, 50 of which 35,000,000 shares will represent New Common, 5,193,520 shares will represent Senior Preferred Stock, and 4,983,180 shares will represent New Junior Preferred Stock, (ii) no shares of capital stock of the Company will be owned or held by or for the account of the Company or any of its Subsidiaries, (iii) except for the New Junior Preferred Stock, neither the Company nor any of its Subsidiaries has or will have outstanding any stock or securities convertible into or exchangeable for any shares of capital stock of the Company of any Subsidiary, any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any other character relating to the issuance of, any capital stock of the Company or any Subsidiary, or any stock or securities convertible into or exchangeable for any such capital stock (other than as set forth in the New Restated Certificate of Incorporation or the Merger Agreement and other than awards granted under the Equity Incentive Plan and the Special Options), and (iv) neither the Company nor any of its Subsidiaries will be subject to any obligation (contingent or otherwise) to repurchase, otherwise acquire or retire any shares of stock (other than as set forth in the New Restated Certificate of Incorporation, the Equity Incentive Plan, the Merger Agreement, the Special Options or as specifically required or permitted hereby). 8O. PATENTS, LICENSES, ETC. The Company and its Subsidiaries own or have the right to use patents, trademarks, service-marks, trade names, copyrights, permits, licenses, franchises and other rights, free from burdensome restrictions, which are reasonably necessary for the operations presently conducted by the Company and its Subsidiaries and as proposed to be conducted by the Company, the failure of which to possess would have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole. 8P. INVESTMENT COMPANY ACT. Neither the Company nor any of its Subsidiaries is an "investment company," or a company 51 "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 8Q. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. 8R. SECURITY INTERESTS. Except as provided herein and subject to the Liens permitted under paragraph 6C(1), the Liens on and security interests created in the Collateral under this Agreement and the Collateral Documents will at all times have the priority contemplated by the Collateral Documents and, upon the filing of the appropriate financing statements and/or the taking of possession of such Collateral, perfected security interests in the Collateral (except for bank accounts and disbursement accounts of the Company) as security for the obligations described therein and the Collateral will not be subject to any liens or security interests of any other person except as permitted hereunder. 8S. DELIVERY OF BMO CREDIT AGREEMENT. The Company has delivered to each Purchaser on or prior to the date hereof a true, correct and complete copy of the BMO Credit Agreement, including all amendments and waivers of any provision thereof. 8T. VALUE OF CERTAIN SUBSIDIARIES. The aggregate value, as of the Closing Date, of the assets of all of the Subsidiaries listed on Schedule 8T, taken as a whole, does not exceed $100,000. 9. REPRESENTATIONS OF EACH PURCHASER. Each Purchaser represents as follows: 9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Securities to be received by it hereunder with a view to or 52 for sale in connection with any distribution thereof within the meaning of the Securities Act, provided that the disposition of such Purchaser's property shall at all times be and remain within its control. 9B. SOURCE OF FUNDS. No part of the funds being used by such Purchaser to pay the purchase price of the Securities being purchased by such Purchaser hereunder constitutes assets allocated to any separate account maintained by such Purchaser. For the purpose of this paragraph 9B, the term "separate account" shall have the meaning specified in section 3(17) of ERISA. 10. DEFINITIONS AND ACCOUNTING TERMS. 10A. DEFINITIONS. For the purpose of this Agreement, the following terms shall have the meanings specified with respect thereto below (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "AFFILIATE" shall mean any Person other than a Purchaser directly or indirectly controlling, controlled by, or under direct or indirect common control with, the Company, except a Subsidiary. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "AGPC" shall have the meaning specified in the Preliminary Statement. "AGREEMENT" shall have the meaning specified in the Preliminary Statement. "ASSET SALE" shall mean any sale or other disposition of assets, including, without limitation, the stock or Debt of Subsidiaries (including, without limitation, by merger or consolidation, and whether by operation of law or otherwise), 53 made on or after the Effective Date by the Company or any Subsidiary, other than the sale or other disposition of assets by the Company or any Subsidiary in the ordinary course of business. "ASSIGNMENT AND SECURITY AGREEMENT" shall mean the Assignment and Security Agreement, dated as of December 14, 1993, made by HD Energy and the Company to the Collateral Agent. "BANKRUPTCY LAW" shall have the meaning specified in clause (vi) of paragraph 7A. "BMO" shall mean Bank of Montreal. "BMO COLLATERAL" shall have the meaning specified in clause (ix) of paragraph 6C(1). "BMO CREDIT AGREEMENT" shall mean the Credit Agreement dated as of the date hereof, by and among the Company, the Subsidiary Borrowers, and BMO, individually and as Agent for the banks listed on the signature pages thereof, as amended, supplemented, extended, renewed or otherwise modified from time to time in accordance with the requirements of paragraph 6G. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "BY-LAWS" shall have the meaning specified in paragraph 3A(1)(v). "CAPITALIZED LEASE OBLIGATION" shall mean any rental obliga- tion which, under generally accepted accounting principles, would be required to be capitalized on the books of the Company or any Subsid- iary, taken at the amount thereof accounted for as indebtedness (net of interest expense) in accordance with such principles. 54 "CASH PAYMENTS" shall have the meaning specified in paragraph 1. "CERTIFICATE OF MERGER" shall have the meaning specified in paragraph 1. "CLOSING" shall have the meaning specified in paragraph 2. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COLLATERAL" shall mean the property pledged under the Collateral Documents, including the proceeds and products thereof. "COLLATERAL AGENT" shall mean Harris Trust and Savings Bank, in its capacity as Collateral Agent under the Collateral Documents. "COLLATERAL AGENCY AGREEMENT" shall have the meaning specified in paragraph 3. "COLLATERAL DOCUMENTS" means the Hadson Security Agreement, the Pledge Agreement, the NuHPI Pledge Agreement, the HD Energy Pledge Agreement, the Hadson Defense Security Agreement and the Assignment and Security Agreement, and all other security agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties, financing statements, continuation statements, extension agreements and other agreements or instruments now or hereafter delivered by the Company or any Subsidiary to the Purchasers in connection with this Agreement or to the Collateral Agent in connection with the Collateral Agency Agreement or any transaction contemplated hereby to secure or guaranty the payment of any part of the Notes or the obligations hereunder or thereunder. 55 "COMPANY" shall have the meaning specified in the introductory sentence. "CONVERSIONS" shall have the meaning specified in the Preliminary Statement. "CURRENT DEBT" shall mean, with respect to any Person, all Indebtedness of such Person for borrowed money which by its terms or by the terms of any instrument or agreement relating thereto matures on demand or within one year from the date of the creation thereof and is not directly or indirectly renewable or extendible at the option of the debtor to a date more than one year from the date of the creation thereof, provided that Indebtedness for borrowed money outstanding -------- under a revolving credit or similar agreement which obligates the lender or lenders to extend credit over a period of more than one year shall constitute Funded Debt and not Current Debt, even though such Indebtedness by its terms matures on demand or within one year from the date of the creation thereof. "DATE OF CLOSING" shall have the meaning specified in paragraph 2. "DEBT" shall mean Current Debt and Funded Debt. "EFFECTIVE DATE" shall mean the date upon which each of the Related Transactions and the transactions contemplated hereby is consummated. "EQUITY INCENTIVE PLAN" shall mean the Company's (1992) Equity Incentive Plan, as amended and restated in the form included as an annex to the Proxy Statement - Prospectus, with such changes to such form of amendment as shall be reasonably acceptable to the Purchasers. "EQUITY SECURITIES" shall have the meaning specified in paragraph 1. 56 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" shall mean any corporation which is a member of the same controlled group of corporations as the Company within the meaning of section 414(b) of the Code, or any trade or business which is under common control with the Company within the meaning of section 414(c) of the Code. "EVENT OF DEFAULT" shall mean any of the events specified in paragraph 7A, provided that there has been satisfied any requirement in connection with such event for the giving of notice, or the lapse of time, or both, or the happening of any further condition, event or act, and "DEFAULT" shall mean any of such events, whether or not any such requirement has been satisfied. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" shall have the meaning specified in the Preliminary Statement. "EXISTING CLASS B COMMON" shall have the meaning specified in the Preliminary Statement. "EXISTING CLASS C COMMON" shall have the meaning specified in the Preliminary Statement. "EXISTING COMMON" shall have the meaning specified in the Preliminary Statement. "EXISTING NOTES" shall have the meaning specified in the Preliminary Statement. "EXISTING PURCHASE AGREEMENT" shall have the meaning specified in the Preliminary Statement. 57 "EXISTING SENIOR PREFERRED" shall have the meaning specified in the Preliminary Statement. "FUNDED DEBT" shall mean, with respect to any Person, all Indebtedness of such Person which by its terms or by the terms of any instrument or agreement relating thereto matures, or which is otherwise payable or unpaid, more than one year from, or is directly or indirectly renewable or extendible at the option of the debtor to a date more than one year (including an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year) from, the date of the creation thereof. "GAS SYSTEMS" shall mean Hadson Gas Systems, Inc., an Oklahoma corporation. "GUARANTEE" shall mean, with respect to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any indebtedness, lease, dividend or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business) or discounted or sold with recourse by such Person, or in respect of which such Person is otherwise directly or indirectly liable, including, without limitation, any such obligation in effect guaranteed by such Person through any agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain the solvency or any balance sheet or other financial condition of the obligor of such obligation, or to make payment for any products, materials or supplies or for any transportation or services regardless of the non-delivery or non-furnishing thereof, in any such case if the purpose or intent of such agreement is to provide assurance that such obligation will be paid or discharged, or that any agreements relating thereto will be complied with, or that the 58 holders of such obligation will be protected against loss in respect thereof. The amount of any Guarantee shall be equal to the outstanding principal amount of the obligation guaranteed or such lesser amount to which the maximum exposure of the guarantor shall have been specifically limited. "HADSON DEFENSE SECURITY AGREEMENT" shall mean the Security Agreement, dated as of December 14, 1993 by and between Hadson Defense Systems, Inc., a Delaware corporation, and the Collateral Agent. "HADSON SECURITY AGREEMENT" shall mean the Security Agreement dated as of December 14, 1993, by and between the Company and the Collateral Agent. "HD ENERGY PLEDGE AGREEMENT" shall mean the Pledge Agreement, dated as of December 14, 1993 by and between HD Energy and the Collateral Agent. "HEPSI" shall mean Hadson Energy Products and Services, Inc., an Oklahoma corporation. "HEPSI MERGER" shall mean the merger of HEPSI with and into the Company on the Effective Date pursuant to Section 253 of the Delaware General Corporation Law. "INDEBTEDNESS" shall mean, with respect to any Person, without duplication, (i) all items (excluding items of contingency reserves or of reserves for deferred income taxes) which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as of the date on which Indebtedness is to be determined, excluding trade payables incurred in the ordinary course of business on normal trade terms and which constitute current liabilities, (ii) all indebtedness secured by any Lien on any property or asset owned or held by such Person subject thereto, whether or not the indebtedness secured thereby shall have been assumed, and (iii) 59 all indebtedness of others with respect to which such Person has become liable by way of a Guarantee. "INDEMNIFIED PARTY" shall have the meaning specified in paragraph 12B. "INTERCOMPANY NOTES" shall mean and include any and all debts, obligations and liabilities of the Company to any of its Subsidiaries evidenced by a promissory note originally or currently held or to be held by any Subsidiary. "INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement, dated as of the Effective Date, among the Purchasers, BMO and the Collateral Agent, in substantially the form of Exhibit D hereto. "LIEN" shall mean any mortgage, pledge, priority, security interest, encumbrance, contractual deposit arrangement, lien (statutory or otherwise) or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation, it being understood that a covenant not to create a Lien on any asset shall not be considered a "Lien" on such asset. "LLANO" shall mean Llano, Inc., a New Mexico corporation. "MARGIN STOCK" shall have the meaning specified in paragraph 8I. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (i) the business, assets, operations, prospects or financial or other condition of the Company and its Subsidiaries 60 taken as a whole, (ii) the ability of the Company to pay the obligations, or to perform its obligations under this Agreement, (iii) the legality, validity or enforceability of this Agreement, the Registration Rights Agreement, the Notes or any Collateral Document or, (iv) the rights and remedies of the Purchasers under this Agreement or any Collateral Document. "MERGER" shall have the meaning specified in the Preliminary Statement. "MERGER AGREEMENT" shall have the meaning specified in the Preliminary Statement. "MERGER NOTES" shall have the meaning specified in the Preliminary Statement. "MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "NET WORTH" shall mean, as of any date of determination thereof, the common and preferred shareholders' equity of the Company at such date as determined in accordance with generally accepted accounting principles. "NEW JUNIOR PREFERRED STOCK" shall mean the Company's Junior Exercisable Automatically Convertible Preferred Stock, Series B, par value $.01 per share, to have the rights set forth in the New Restated Certificate of Incorporation. "NEW RESTATED CERTIFICATE OF INCORPORATION" shall have the meaning specified in paragraph 1. "NEW COMMON" shall mean the Company's new common stock, par value $.01 per share. "NOTES" shall have the meaning specified in paragraph 1. 61 "NUHPI PLEDGE AGREEMENT" shall mean the Pledge Agreement dated as of December 14, 1993 by and between NuHPI, Inc., a Delaware corporation, and the Collateral Agent. "OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of the Company by its Chief Executive Officer, President and Chief Operating Officer, Executive Vice President, Chief Financial Officer or Treasurer. "OLD JUNIOR PREFERRED" shall have the meaning specified in the Preliminary Statement. "OTHER SUBSIDIARY" shall mean a Wholly-Owned Subsidiary that is not a Subsidiary Borrower or a Pledged Subsidiary. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor entity. "PERSON" shall mean and include an individual, a partner- ship, a joint venture, a corporation, a trust, a limited liability company, an unincorporated organization and a government or any department or agency thereof. "PIPELINE" shall have the meaning set forth in the preliminary statement. "PLAN" shall mean any "employee pension benefit plan" (as such term is defined in section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company, any of its Subsidiaries or, with respect to a Plan subject to Section 412 of the Code, any ERISA Affiliate. "PLEDGE AGREEMENT" shall mean the Pledge Agreement dated as of December 14, 1993 by and between the Company and the Collateral Agent. 62 "PLEDGED SUBSIDIARY" shall mean any Subsidiary the stock or assets of which is subject to a Lien in favor of the Collateral Agent. "PRESENT COLLATERAL DOCUMENTS" shall mean the Hadson Security Agreement, the Pledge Agreement, the Assignment and Security Agreement, the NuHPI Pledge Agreement, the HD Energy Pledge Agreement and the Hadson Defense Security Agreement. "PROXY STATEMENT - PROSPECTUS" shall mean the Company's Proxy Statement - Prospectus, dated November 10, 1993, distributed by the Company in connection with the Merger. "PRUDENTIAL" shall mean The Prudential Insurance Company of America and any of its affiliates. "PURCHASER SCHEDULE" shall have the meaning specified in the introductory sentence. "PURCHASERS" shall have the meaning specified in the introductory sentence. "REGISTRATION RIGHTS AGREEMENT" shall have the meaning specified in paragraph 3. "RELATED TRANSACTIONS" shall mean, collectively, the Merger, the HEPSI Merger and the Conversions. "REQUIRED HOLDER(S)" shall mean the holder or holders of at least 66 2/3% of the aggregate principal amount of the Notes from time to time outstanding. "RESPONSIBLE OFFICER" shall mean the chief executive officer, chief operating officer, chief financial officer or chief accounting officer of the Company or any other officer of the Company involved principally in its financial administration or its controllership function. 63 "RESTRICTED PAYMENTS" shall have the meaning specified in paragraph 6B. "SECURITIES" shall have the meaning specified in paragraph 1. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "SENIOR PREFERRED STOCK" shall mean the Company's Senior Cumulative Preferred Stock, Series A, par value $.01 per share, to have the rights set forth in the New Restated Certificate of Incorporation. "SENIOR SECURED NOTES" shall have the meaning specified in paragraph 1. "SFER" shall have the meaning specified in the Preliminary Statement. "SIGNIFICANT HOLDER" shall mean (i) each Purchaser, so long as such Purchaser shall hold (or be committed under this Agreement to purchase) any Note, or (ii) any other holder of at least 5% of the aggregate principal amount of the Notes from time to time outstanding. "SPECIAL OPTIONS" shall mean the options to purchase 100,000 shares of the Existing Common granted to each of Harry G. Hadler, S.D. Wilks, C.B. and Walter C. Wilson in connection with the Merger. "SUBORDINATED DEBT" shall mean Debt subordinated in right of payment to any of the Notes. "SUBSIDIARY" shall mean any corporation organized under the laws of any state of the United States, Canada, or any province of Canada, which conducts the major portion of its business in and makes the major portion of its sales to Persons 64 located in the United States or Canada, except directors' qualifying shares, at least a majority of the total combined voting power of all classes of Voting Stock of which shall, at the time as of which any determination is being made, be owned by the Company either directly or through Subsidiaries. "SUBSIDIARY BORROWERS" shall mean Gas Systems, United LP and Western Natural. "TOTAL CAPITAL" shall mean, as of any date of determination thereof, the sum of the following for the Company as determined in accordance with generally accepted accounting principles: (i) common and preferred shareholders' equity at such date; and (ii) the outstanding principal amount of Funded Debt at such date (including any portion thereof which may be Current Debt at such date). "TRANSFEREE" shall mean any direct or indirect transferee of all or any part of any Note. "TRUST" shall mean the trust created pursuant to the Trust Agreement. "TRUST AGREEMENT" shall mean the Trust Agreement, dated as of the Effective Date, by and between the Company, the Trustee and the Purchasers, in substantially the form of Exhibit T. "TRUSTEE" shall mean Liberty Bank and Trust Company of Oklahoma City, N.A., in its capacity as trustee under the Trust Agreement. "UNITED LP" shall mean United LP Gas Corporation, an Oklahoma corporation. "VOTING AGREEMENT" shall mean a voting agreement, dated as of the Effective Date, among SFER, Pipeline and the Purchasers, in ----- substantially the form of Exhibit I. 65 "VOTING STOCK" shall mean, with respect to any corporation, any shares of stock of such corporation whose holders are entitled under ordinary circumstances to vote for the election of directors of such corporation (irrespective of whether at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "WESTERN NATURAL" shall mean Western Natural Gas & Transportation Corp., a Colorado corporation. "WHOLLY-OWNED SUBSIDIARY" shall mean any corporation organized under the laws of any state of the United States, Canada, or any province of Canada, which conducts the major portion of its business in and makes the major portion of its sales to Persons located in the United States or Canada, and all of the stock of every class of which, except directors qualifying shares, is, and 100% of the total combined voting power of all classes of Voting Stock of which shall, at the time as of which any determination is being made, be owned by the Company either directly or through Wholly-Owned Subsidiaries. 10B. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in this Agreement to "generally accepted accounting principles" shall be deemed to refer to generally accepted accounting principles in effect in the United States at the time of application thereof. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all unaudited financial statements and certificates and reports as to financial matters required to be furnished hereunder shall be prepared, in accordance with generally accepted accounting principles, applied on a basis consistent with the most recent audited consolidated financial statements of the Company and its Subsidiaries delivered pursuant to clause (iii) of paragraph 5A or, if no such statements have been so delivered, the most recent audited financial statements referred to in clause (i) of paragraph 8B. 66 10C. COMPUTATION OF TIME PERIODS. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." 11. JUDICIAL PROCEEDINGS. 11A. CONSENT TO JURISDICTION. The Company irrevocably submits to the non-exclusive jurisdiction of any New York State or Federal court sitting in the City of New York over any suit, action or proceeding arising out of or relating to this Agreement or the Notes. To the fullest extent it may effectively do so under applicable law, the Company irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 11B. ENFORCEMENT OF JUDGMENTS. The Company agrees, to the fullest extent it may effectively do so under applicable law, that a judgment in any suit, action or proceeding of the nature referred to in paragraph 11A brought in any such court shall be conclusive and binding upon the Company subject to rights of appeal, as the case may be, and may be enforced in the courts of the United States of America or the State of New York (or any other courts to the jurisdiction of which the Company is or may be subject) by a suit upon such judgment. 11C. SERVICE OF PROCESS. The Company consents to process being served in any suit, action or proceeding of the nature referred to in paragraph 11A by mailing a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to the address of the Company specified in or designated pursuant to paragraph 12I. The Company agrees that such service (i) shall be deemed in every respect effective 67 service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon and personal delivery to the Company. Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any commercial delivery service. 11D. NO LIMITATION ON SERVICE OR SUIT. Nothing in this paragraph 11 shall affect the right of the Purchasers to service process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against the Company in the courts of any jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction. 12. MISCELLANEOUS. 12A. NOTE PAYMENTS. The Company agrees that, so long as any Purchaser shall hold any Note, it will make payments of principal of, and interest on, such Note, which comply with the terms of this Agree- ment, by wire transfer of immediately available funds for credit (not later than 12:00 noon, New York City time, on the date due) to such Purchaser's account or accounts as specified in the Purchaser Schedule attached hereto, or such other account or accounts in the United States as such Purchaser may designate in writing, notwithstanding any contrary provision herein or in any Note with respect to the place of payment. The Company agrees that, so long as any Purchaser shall hold any shares of Equity Securities, it will make dividend payments and other distributions on the shares of Equity Securities to the holders of record at the address appearing in the records of the Company in accordance with the New Restated Certificate of Incorporation. Each Purchaser agrees that, before disposing of any Note, such Purchaser will make a notation thereon (or on a schedule attached thereto) of all principal payments previously made thereon and of the date to which interest thereon has been paid. The Company agrees to afford the benefits of this paragraph 12A to any Transferee which shall have 68 made the same agreement as each Purchaser has made in this paragraph 12A. 12B. EXPENSES; INDEMNITY. The Company agrees, whether or not the transactions contemplated hereby shall be consummated, to pay, and save each Purchaser and any Transferee harmless against liability for the payment of, all out-of-pocket expenses arising in connection with such transactions, including (i) all document production and duplica- tion charges and the fees and expenses of any special counsel engaged by such Purchaser or such Transferee in connection with this Agreement, the Securities being purchased hereunder or received by the Purchasers pursuant to the Merger Agreement, the Trust Agreement, the Voting Agreement, the Registration Rights Agreement, the Collateral Documents, the Related Transactions and the transactions contemplated hereby and thereby, including, without limitation, all such charges, fees and expenses for the period prior to the date hereof and any subsequent proposed modification hereof or thereof, or proposed consent hereunder or thereunder, whether or not such proposed modification shall be effected or proposed consent granted and (ii) the costs and expenses, including attorneys' fees, incurred by such Purchaser or such Transferee in enforcing (or determining whether or how to enforce) any rights hereunder or thereunder or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the transactions contem- plated hereby or by reason of such Purchaser's or such Transferee's having acquired any Security including, without limitation, costs and expenses incurred in any bankruptcy case of the Company or any Subsidiary. To the fullest extent permitted under applicable law, the Company agrees to indemnify and hold harmless each of the Purchasers and each of their affiliates and their respective directors, officers, employees, agents, advisors, attorneys and consultants (each an "INDEMNIFIED PARTY"), on an after-tax basis, from and against any and all losses, claims, actions, causes of action, suits, damages, liabilities, costs and expenses, including, without limitation, taxes (other than any income and franchise taxes except as set forth below), environmental liabilities, costs and 69 expenses and all fees and disbursements of counsel, which may be incurred by or awarded against any such Indemnified Party in connection with or arising out of, or by reason of the preparation of the defense of, any investigation, litigation or proceeding, whether or not any Indemnified Party is a party thereto, related to or in connection with this Agreement or any of the transactions contemplated hereby; provided, however, that the Company shall not be liable for -------- ------- such indemnification to such Indemnified Party to the extent that any indemnified liabilities arise on account of such Indemnified Party's gross negligence or willful misconduct; provided, further, if and to -------- ------- the extent such agreement to indemnify may be unenforceable for any reason whatsoever, the Company shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which shall be permissible under the applicable law. In furtherance (and not in limitation) of the foregoing, the Company agrees to indemnify and hold harmless each of the Purchasers and each of their affiliates on an after-tax basis against any federal, state or local income tax liability incurred by any of them as a result of a determination by any federal, state or local taxing authority that the Notes issued by the Company to the Purchasers under this Agreement have original issue discount, as defined in section 1273 of the Code, or any provisions of state or local law having a similar purpose or effect. For purposes of the two preceding sentences, an indemnity payment is made on an after-tax basis if the amount is such that, after the payment of any federal, state or local taxes payable on account of the receipt of such indemnity payment, the remainder of the indemnity payment is sufficient to pay all indemnified liabilities on account of which the indemnity payment is made. If any federal, state or local taxing authority shall assert a claim for income taxes against any Purchaser or any of its affiliates that would be subject to indemnification hereunder, such Purchaser or such affiliate shall notify the Company in writing of such claim within 20 days after receipt of such claim, and shall take such action to contest such claim as the Company shall reasonably request from time to time, including appeals. The failure of such Purchaser or such affiliate to give 70 timely notice of any such claim to the Company shall not pre-empt its right to indemnification hereunder unless such failure results in the Company's inability to contest any such claim. The Company agrees to pay any Purchaser or any of its affiliates interest at the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York as its Prime Rate commencing on the date any such tax liability subject to indemnification hereunder is paid by such Purchaser or such affiliate and ending on the date of the related indemnity payment by the Company. The obligations of the Company under this paragraph 12B shall survive the transfers, redemption, exchange, purchase, conversion or other acquisition of any shares of Equity Securities or the transfer of any Note or portion thereof or interest therein by any Purchaser or any Transferee and the payment of any Note. 12C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if the Company shall obtain the written consent to such amendment, action or omission to act, of the Required Holder(s) except that, without the written consent of the holder or holders of all Notes at the time outstanding, no amendment to this Agreement shall change the maturity of any Note, or change the principal of, or the rate or time of payment of interest on, any Note, or affect the time, amount or allocation of any prepay- ments, or change the proportion of the principal amount of the Notes required with respect to any consent, amendment, waiver or declaration. Each holder of any Note at the time or thereafter outstanding shall be bound by any consent authorized by this paragraph 12C, whether or not such Note shall have been marked to indicate such consent, but any Notes issued thereafter may bear a notation referring to any such consent. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein and in the Notes the term "this Agreement" and references thereto shall mean 71 this Agreement as it may from time to time be amended, supplemented or otherwise modified. 12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES. The Notes are issuable as registered notes without coupons in denominations of at least $100,000, except as may be necessary to reflect any principal amount not evenly divisible by $100,000. The Company shall keep at its principal office a register in which the Company shall provide for the registration of Notes and of transfers of Notes. Each Purchaser may sell, transfer, negotiate or assign to one or more Transferees all or a portion of the Notes held by it. Upon surrender for registration of transfer of any Note at the principal office of the Company, the Company shall, at its expense, execute and deliver one or more new Notes of like tenor and of a like aggregate principal amount, registered in the name of such Transferee or Transferees. At the option of the holder of any Note, such Note may be exchanged for other Notes of like tenor and of any authorized denominations, of a like aggregate principal amount, upon surrender of the Note to be exchanged at the principal office of the Company. Whenever any Notes are so surrendered for exchange, the Company shall, at its expense, execute and deliver the Notes which the holder making the exchange is entitled to receive. Every Note surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer duly executed, by the holder of such Note or such holder's attorney duly authorized in writing. Any Note or Notes issued in exchange for any Note or upon transfer thereof shall carry the rights to unpaid interest and interest to accrue which were carried by the Note so exchanged or transferred, so that neither gain nor loss of interest shall result from any such transfer or exchange. Upon receipt of written notice from the holder of any Note of the loss, theft, destruction or mutilation of such Note and, in the case of any such loss, theft or destruction, upon receipt of such holder's unsecured indemnity agreement, or in the case of any such mutilation upon surrender and cancellation of such Note, the Company will make and deliver 72 to such holder a new Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note. 12E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for registration of transfer, the Company may treat the Person in whose name any Note is registered as the owner and holder of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary. Subject to the preceding sentence, the holder of any Note may from time to time grant participations in such Note to any Person on such terms and conditions as may be determined by such holder in its sole and absolute discretion, provided that any such participation shall be in a -------- principal amount of at least $100,000. 12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS; ENTIRE AGREEMENT. All representations and warranties contained herein or made in writing by or on behalf of the Company in connection herewith shall survive the execution and delivery of this Agreement and the Securities, the transfer by any Purchaser of any Securities or portion thereof or interest therein and the payment of any Note, and may be relied upon by any Transferee, regardless of any investigation made at any time by or on behalf of any Purchaser or any Transferee. Subject to the preceding sentence, this Agreement, the Registration Rights Agreement, the Trust Agreement, the Securities (including the New Restated Certificate of Incorporation) and the Collateral Documents embody the entire agreement and understanding between the Purchasers and the Company and supersede all prior agreements and understandings relating to the subject matter hereof, including, without limitation, the Existing Purchase Agreement, which is hereby terminated in its entirety; provided, however, that notwithstanding -------- ------- the above or anything to the contrary set forth in this Agreement, the Company's obligations under paragraph 12B of the Existing Purchase Agreement shall survive the Closing hereunder and shall not be terminated hereby. 73 12G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this Agreement contained by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including, without limitation, any Transferee) whether so expressed or not. 12H. DISCLOSURE TO OTHER PERSONS. The Company acknowledges that the holder of any Note may deliver copies of any financial statements and other documents delivered to such holder, and disclose any other information disclosed to such holder, by or on behalf of the Company or any Subsidiary in connection with or pursuant to this Agreement to (i) such holder's directors, officers, employees, agents and professional consultants, (ii) any other holder of any Note or Equity Securities, (iii) any Person to which such holder offers to sell such Note or Equity Securities or any part thereof, (iv) any Person to which such holder sells or offers to sell a participation in all or any part of such Note or Equity Securities, (v) any Person from which such holder offers to purchase any security of the Company, (vi) any federal or state regulatory authority having jurisdiction over such holder, (vii) the National Association of Insurance Commissioners or any similar organization or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (a) in compliance with any law, rule, regulation or order applicable to such holder, (b) in response to any subpoena or other legal process or informal investigative demand or (c) in connection with any litigation to which such holder is a party. 12I. NOTICES. All notices or other communications provided for hereunder (except for the telephonic notice required by paragraph 4C) shall be in writing and sent by first class mail or nationwide overnight delivery service (with charges prepaid) and (i) if to any Purchaser, addressed to such Purchaser at the address specified for such communications in the Purchaser Schedule attached hereto, or at such other address as such Purchaser shall have specified to the Company in writing, (ii) if to any other holder of any Note, addressed to such other holder 74 at such address as such other holder shall have specified to the Company in writing or, if any such other holder shall not have so specified an address to the Company, then addressed to such other holder in care of the last holder of such Note which shall have so specified an address to the Company, and (iii) if to the Company, addressed to it at 101 Park Avenue, Suite 1400, Oklahoma City, Oklahoma 73102, Attention: President, or at such other address as the Company shall have specified to the holder of each Note in writing; provided, however, that any such communication to the Company -------- ------- may also, at the option of the holder of any Note, be delivered by any other means either to the Company at its address specified above or to any officer of the Company. 12J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day. If the date for any payment is extended to the next succeeding Business Day by reason of the preceding sentence, the period of such extension shall be included in the computation of the interest payable on such Business Day. 12K. SATISFACTION REQUIREMENT. If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement required to be satisfactory to any Purchaser or to the Required Holder(s), the determination of such satisfaction shall be made by such Purchaser or the Required Holder(s), as the case may be, in the sole and exclusive judgment (exercised in good faith) of the Person or Persons making such determination. 12L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS. 12M. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to 75 such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 12N. DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 12O. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. 12P. SEVERALTY OF OBLIGATIONS. The exchanges of the Exchange Notes hereunder are to be several transactions, and the obligations of the Purchasers under this Agreement are several obligations. No failure by any Purchaser to perform its obligations under this Agreement shall relieve any other Purchaser or the Company of any of its obligations hereunder, and no Purchaser shall be responsible for the obligations of, or any action taken or omitted by, any other Purchaser hereunder. 76 If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterparts of this letter and return the same to the Company, whereupon this letter shall become a binding agreement among the Company and the Purchasers. Very truly yours, HADSON CORPORATION By________________________ Title: The foregoing Agreement is hereby accepted as of the date first above written. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By_________________________ Vice President PRUCO LIFE INSURANCE COMPANY By__________________________ Vice President PRUSUPPLY, INC. By_________________________ Vice President 77 EXHIBIT A --------- FORM OF SENIOR SECURED NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION EXCEPT PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT. HADSON CORPORATION 8% SENIOR SECURED NOTE DUE 2003 No. __ New York, NY, December __, 1993 $___________ FOR VALUE RECEIVED, the undersigned, HADSON CORPORATION, a corporation organized and existing under the laws of the State of Delaware (herein called the "Company"), hereby promises to pay to _________________________________, or its registered assigns, the principal sum of _____________________________ DOLLARS ($_____________) on December 31, 2003, with interest (computed on the basis of a 360-day year -- 30-day month) (a) on the unpaid balance thereof at the rate of 8% per annum from the date hereof, payable quarterly on the last day of March, June, September and December in each year, commencing with the March 31, June 30, September 30 and December 31 next succeeding the date hereof, until the principal hereof shall have become due and payable and (b) on any overdue payment (including any overdue prepayment) of principal, and any overdue payment of interest, payable quarterly as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 10% and (ii) 2% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time as its Prime Rate effective as of the effective date of the change of each Prime Rate. A-1 Payments of principal and interest on this Note are to be made at the main office of Morgan Guaranty Trust Company of New York in New York City or at such other place as the holder hereof shall designate to the Company in writing, in lawful money of the United States of America. This Note is one of the Senior Secured Notes issued pursuant to the Securities Purchase Agreement, dated as of December , 1993 -- (the "Agreement"), among the Company and the purchasers of the Senior Secured Notes listed on the Purchaser Schedule attached thereto, and is entitled to the benefits thereof. Capitalized terms used herein not otherwise defined shall have the meanings ascribed to them in the Agreement. The Company agrees to make required prepayments of principal on the dates and in the amounts specified in the Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, on the terms specified in the Agreement. The repayment of the principal and interest on this Note is secured as provided in the Collateral Documents. Reference is hereby made to the Collateral Documents for a description of the property and assets in which a security interest has been granted, the nature and extent of the security, the terms and conditions upon which the security interest was granted and the rights of the holder of this Senior Secured Note in respect thereof. This Senior Secured Note is a registered Note and, in accordance with the terms of the Agreement, upon surrender of this Senior Secured Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Senior Secured Note for a like principal amount will be issued to, and registered in A-2 the name of, the Transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Senior Secured Note is registered as the owner thereof for the purpose of receiving payment and for all other purposes, and the Company shall not be affected by any notice to the contrary. If an Event of Default shall occur and be continuing, the principal of this Senior Secured Note may be declared or otherwise become due and payable in the manner and with the effect provided in the Agreement. THIS SENIOR SECURED NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS. HADSON CORPORATION By: ------------------------------------- Title: A-3 -----END PRIVACY-ENHANCED MESSAGE-----