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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
September 3, 1997
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MONTEREY RESOURCES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 1-23111 76-0511993
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification Number)
incorporation or organization)
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5201 TRUXTUN AVENUE
BAKERSFIELD, CALIFORNIA 93309
REIGSTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE:
805-322-3992
(Address of principal executive offices, including zip code)
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ITEM 5 -- OTHER EVENTS
On August 28, 1997 a holder of Monterey Resources, Inc. (the
"Company") common stock, par value $0.01, filed a purported class action
complaint (the "Complaint") in the Delaware Court of Chancery, No. 15886--NC,
seeking (i) to enjoin the merger of the Company and Texaco Inc. on the terms
proposed and (ii) damages. Defendants named in the Complaint are Monterey and
each of its directors. The plaintiff alleges numerous breaches of the duties
of care and loyalty owed by the defendants to the purported class in connection
with entering into the merger agreement with Texaco Inc.
The defendants believe the Complaint is without merit and intend to
vigorously defend the action. A copy of the Complaint is attached as an
exhibit to this Form 8-K and incorporated by reference.
ITEM 7 -- FINANCIALS AND EXHIBITS
(c) - Exhibits
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EXHIBIT NUMBER DESCRIPTION
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99.1 Complaint dated August 28, 1997 filed in the
Court of Chancery of the State of Delaware in and for
New Castle County, Civil Action No. 15886--NC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, Monterey Resources, Inc. has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
MONTEREY RESOURCES, INC.
/s/ TERRY ANDERSON
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Terry Anderson
General Counsel and Secretary
September 3, 1997
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EXHIBIT INDEX
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EXHIBIT NUMBER DESCRIPTION
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99.1 Complaint dated August 28, 1997 filed in the Court of
Chancery of the State of Delaware in and for New Castle
County, Civil Action No. 15886--NC.
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EXHIBIT 99.1
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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RAIZY LEVITIN,
Plaintiff, :
:
v.
:
R. GRAHAM WHALING, MICHAEL A. MORPHY, ROBERT F.
VAGT, CRAIG A. HUFF, ROBERT J. WASIELEWSKI, JAMES : C.A. No. 15886-NC
L. PAYNE, JAMES A. MIDDLETOWN and MONTEREY
RESOURCES, INC. :
Defendants, :
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CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the common stock of Monterey
Resources, Inc. ("Monterey" or the "Company") since prior to the transaction
herein complained of and continuously to date.
2. Monterey is a corporation duly organized and existing under
the laws of the State of Delaware. The Company owns and operates properties in
four major oil producing fields located in the San Joaquin Valley of California
of which three are the largest producing properties in Los Angeles and Orange
Counties.
3. Texaco, Inc. ("Texaco") is a corporation duly organized and
existing under the laws of the State of Delaware. Texaco, with subsidiaries,
explores for, produces, transports, refines and markets crude oil, natural gas
and petroleum products worldwide.
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4. Defendant R. Graham Whaling is Chairman of the Board, Chief
Executive Officer and Chief Financial Officer of Monterey.
5. Defendants Robert F. Vagt, Michael A. Morphy, Craig A. Huff,
Robert J Wasielewski, James L. Payne and James A. Middleton are Directors of
Monterey.
6. The Individual Defendants are in a fiduciary relationship with
Plaintiff and the other public stockholders of Monterey and owe them the
highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
7. Plaintiff brings this action on her own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all common stock holders of the Company (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants) and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more fully described
herein.
8. This action is properly maintainable as a class action
because:
(a) The Class is so numerous that joinder of all members
is impracticable. As of March 3, 1997, there were approximately 54.8 million
shares of Monterey common stock outstanding owned by hundreds, if not
thousands, of record and beneficial holders;
(b) There are questions of law and fact which are common
to the class including, inter alia, the following: (i) whether defendants have
breached their fiduciary and other common law duties owed by them to plaintiff
and the members of the Class; and (ii) whether the Class is entitled to
injunctive relief or damages as a result of the wrongful conduct committed by
defendants.
(c) Plaintiff is committed to prosecuting this action and
has retained competent counsel experienced in litigation of this nature. The
claims of the plaintiff are typical of the claims
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of other members of the class and plaintiff has the same interests as the other
members of the class. Plaintiff will fairly and adequately represent the
class.
(d) Defendants have acted in a manner which affects
plaintiff and all members of the class alike, thereby making appropriate
injunctive relief and/or corresponding declaratory relief with respect to the
class as a whole.
(e) The prosecution of separate actions by individual
members of the class would create a risk of inconsistent or varying
adjudications with respect to individual members of the Class, which would
establish incompatible standards of conduct for defendants, or adjudications
with respect to individual members of the Class which would, as a practical
matter, be dispositive of the interest of other members of substantially impair
or impede their ability to protect their interests.
SUBSTANTIVE ALLEGATIONS
9. Monterey is an independent oil and gas company engaged in the
production, development, and acquisition of oil and natural gas in the state of
California. The Company conducted its operations as the Western Division of
Santa Fe Energy Resources ("SFR") until the November 1995 initial public
offering ("IPO") of its common stock. SFR owned 83% of the outstanding shares
of Monterey until spinning off those shares in a tax-free distribution to SFR
shareholders on July 25, 1997.
10. On July 16, 1997, Monterey announced that its board of
directors had adopted a shareholder rights plan ("Plan"), colloquially called a
"poison pill," in which preferred stock purchase rights would be distributed
for each share of common stock held as of July 25, 1997. The Plan was adopted
in accordance with the Company's contractual obligations to SFR under the
spin-off of Monterey to SFR shareholders.
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11. At the time of its IPO in November 1996, Monterey's Prospectus
stated: "[T]he Company's strategy is to efficiently and consistently increases
its production rates and proved reserves while maximizing total return to
stockholders. The Company intends to achieve its objectives by developing its
existing fields through the deployment of advanced production techniques, by
pursuing reserve acquisition opportunities which are consistent with its
geographic and operational strengths, and by maintaining a dividend policy that
will provide a significant current return to stockholders."
12. The Prospectus described key elements of this strategy as
including: accelerated exploitation of existing fields; increased horizontal
drilling; being the U.S.A.'s lowest cost producer of heavy crude; and financial
flexibility, including pursuing acquisition opportunities.
13. Thus, the announced merger surprised analysts and Monterey
shareholders alike. Monterey had been a company whose purpose was to develop
oil and gas properties. Earlier, this year defendant Whaling said the Company
would like to enter into overseas ventures with heavy oil producers in Canada
and Venezuela, following local acquisitions.
14. Recently, on July 23, 1997, the Company announced the
successful completion of a tender offer to purchase McFarland Energy in a deal
valued at over at over $105 million.
15. On July 29, 1997, defendant Whaling publicly stated that the
Company was considering making more acquisitions.
16. Notwithstanding the foregoing events and representations, on
August 18, 1997, Monterey and Texaco announced an agreement for the combination
of Texaco and Monterey (the "Merger"). Texaco will exchange shares of its
common stock for all outstanding shares of Monterey common stock. Each share
of Monterey's common stock will be converted into the right to receive
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shares of Texaco common stock equal to $21.00 per share of Monterey stock. The
total value of the transaction, inclusive of $265 million Monterey debt, is
approximately $1.12 billion.
17. The negotiations between the companies were very short. Talks
between Texaco and Monterey purportedly began scarcely two weeks before the
announcement of the Merger, following the completion of SFR's spinoff of its
83% ownership in Monterey.
18. Thus, defendants could not have properly or adequately
solicited or examined any competing offers of strategic alternatives.
19. As John Johnson, a money manager at Crabbe Huson Group,
stated, "Texaco is paying a very modest premium over what I think the company
would be worth in liquidation."
20. By entering into the agreement with Texaco, the Monterey Board
has initiated a process to sell the Company which imposes heightened fiduciary
responsibilities and requires enhanced scrutiny by the Court. However, the
terms of the proposed transaction were not the result of an auction process or
active market check; they were arrived at without a full land thorough
investigation by the individual defendants; and they are intrinsically unfair
and inadequate from the standpoint of the Monterey shareholders.
21. The individuals defendants failed to make an informed
decision, as no market check of the Company's value was obtained. In agreeing
to the merger, the individual defendants failed to properly inform themselves
of Monterey's highest transactional value.
22. The individual defendants have violated the fiduciary duties
owed to the public shareholders of Monterey. The Individual Defendants'
agreement to the terms of the transaction, its timing, and the failure to
auction the Company and invite other bidders and defendants' failure
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to provide a market check demonstrate a clear absence of the exercise of due
care and of loyalty to Monterey's public shareholders.
23. The individual defendants' fiduciary obligations under these
circumstances require them to:
(a) Undertake an appropriate evaluation of Monterey's net
worth as a merger/acquisition candidate; and
(b) Actively evaluate the proposed transaction and engage
in a meaningful auction with third parties in an attempt to obtain the best
value for Monterey's public shareholders.
24. The individual defendants have breached their fiduciary duties
by reason of the acts and transactions complained of herein, including their
decision to merge with Texaco without making the requisite effort to obtain the
best offer possible.
25. Plaintiff and other members of the Class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of Monterey's assets and business, and will be prevented from obtaining
fair and adequate consideration for their shares of Monterey common stock.
26. The consideration to be paid to class members in the proposed
merger is unfair and inadequate because, among other things:
(a) The intrinsic value of Monterey's common stock is
materially in excess of the amount offered for those securities in the Merger
giving due consideration to the anticipated operating results, net asset value,
cash flow, and profitability of the Company;
(b) The exchange ratio is not the result of an
appropriate consideration of the value of Monterey because the Monterey Board
approved the proposed Merger without undertaking
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steps to accurately ascertain Monterey's value through open bidding or at least
a "market check mechanism;" and
(c) By entering into the agreement with Texaco, the
individual defendants have allowed the price of Monterey stock to be capped,
thereby depriving plaintiff and the Class of the opportunity to realize any
increase in the value of Monterey stock.
27. By reason of the foregoing, each member of the Class will
suffer irreparable injury and damages absent injunctive relief by this Court.
28. Plaintiff and other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
A. Declaring that this action is properly maintainable as a class
action and certifying plaintiff as the representative of the Class;
B. Preliminarily and permanently enjoining defendants and their
counsel, agents, employees and all persons acting under in concert with, or for
them, from proceeding with, consummating, or closing the proposed transaction;
C. In the event that the proposed transaction is consummated,
rescinding it and setting it aside, or awarding rescissory damages to the
Class;
D. Awarding compensatory damages against defendants, individually
and severally, in an amount to be determined at trial, together with
pre-judgment and post-judgement interest at the maximum rate allowable by law,
arising from the proposed transaction;
E. Awarding plaintiff her costs and disbursements and reasonable
allowance for fees of plaintiff's counsel and experts and reimbursement of
expenses; and
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F. Granting plaintiff and the Class such other and further relief
as the Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/
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Suite 1401, Mellon Bank Center
PO Box 1670
Wilmington, DE 19899-1070
(302) 856-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, New York 10015
(212) 779-1414
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