Maxus Energy Corporation
717 North Harwood Street
Dallas, Texas 75201
INFORMATION STATEMENT
Pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1 Thereunder
INTRODUCTION
This Information Statement is being mailed by Maxus Energy
Corporation, a Delaware corporation (the "Company"), on or about
April 11, 1995 to holders of record as of April 4, 1995 of shares
of the Company's (i) common stock, par value $1.00 per share
("Common Stock"), and (ii) $4.00 Cumulative Convertible Preferred
Stock, par value $1.00 per share (the "$4.00 Preferred Stock" and
together with the Common Stock, the "Voting Shares"), in
connection with the designation by YPF Sociedad Anonima, a
sociedad anonima organized under the laws of the Republic of
Argentina ("YPF"), of persons to be elected to the Board of
Directors of the Company (the "Board of Directors") other than at
a meeting of the Company's stockholders, in accordance with the
Agreement of Merger among YPF, YPF Acquisition Corp. (the
"Purchaser") and the Company, dated as of February 28, 1995 (the
"Merger Agreement").
This Information Statement is being provided pursuant to
Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14f-1 thereunder.
You are not required to take any action at this time.
However, you are urged to read this Information Statement
carefully.
As of April 4, 1995, 135,587,364 shares of Common Stock and
4,356,958 shares of $4.00 Preferred Stock were outstanding. Each
such share is entitled to one vote in the election of directors
of the Company.
The information contained in this Information Statement
concerning YPF and the Purchaser and the Designees (as defined
below) has been furnished to the Company by YPF and the
Purchaser.
MERGER AGREEMENT
Pursuant to the Merger Agreement, on March 3, 1995, the
Purchaser commenced a cash tender offer (the "Offer") to acquire
all of the outstanding shares of Common Stock at a price of $5.50
per share of Common Stock, net to the seller in cash. Upon the
expiration of the Offer, approximately 88.0% of the outstanding
shares of Common Stock or approximately 85.3% of the outstanding
Voting Shares had been tendered and were acquired by the
Purchaser.
The Merger Agreement provides that, after the completion of
the Offer, and subject to the terms and conditions in the Merger
Agreement, the Purchaser will be merged with and into the Company
(the "Merger") and the Company will survive as the surviving
corporation. Each then-outstanding share of Common Stock (other
than shares of Common Stock held by
<PAGE>
YPF, the Purchaser, or any of their subsidiaries, or in the
treasury of the Company, all of which will be cancelled, and
shares of Common Stock held by stockholders who perfect their
appraisal rights under Delaware law) will be converted into the
right to receive $5.50 per share of Common Stock in cash.
The Merger Agreement also provides that, upon the
Purchaser's acquisition of a majority of the outstanding Voting
Shares pursuant to the Offer, and from time to time thereafter so
long as YPF and/or any of its direct or indirect wholly owned
subsidiaries (including the Purchaser) owns a majority of the
outstanding Voting Shares, YPF will be entitled, subject to
compliance with applicable law and the Company's Restated
Certificate of Incorporation, to designate at its option up to
that number of directors, rounded up to the nearest whole number,
of the Board of Directors as will make the percentage of the
Company's directors designated by YPF equal to the percentage of
outstanding Voting Shares held by YPF and any of its direct or
indirect wholly owned subsidiaries (including the Purchaser),
including shares of Common Stock accepted for payment pursuant to
the Offer. The Company has agreed that it will, upon the request
of YPF, promptly increase the size of the Board of Directors
and/or use its reasonable best efforts to secure the resignation
of such number of directors as is necessary to enable YPF's
designees to be elected to the Board of Directors and will use
its reasonable best efforts to cause designees to be so elected,
subject to Section 14(f) of the Exchange Act; provided that,
prior to the Effective Time (as defined in the Merger Agreement)
of the Merger, the Company will use its reasonable best efforts
to assure that the Board of Directors always has (at its
election) at least three members who were directors of the
Company as of February 28, 1995. At such times, the Company will
use its reasonable best efforts, subject to any limitations
imposed by law or rules of the New York Stock Exchange (the
"NYSE"), to cause persons designated by YPF to constitute the
same percentage as such persons represent on the Board of
Directors of (i) each committee of the Board of Directors, (ii)
each board of directors or board of management of each subsidiary
of the Company and (iii) each committee of each such board.
The Purchaser's beneficial ownership of approximately 85.3%
of the outstanding Voting Shares would entitle it to be
represented by ten of the 13 members of the Board of Directors
pursuant to the above-described provision. YPF has designated
five persons (Messrs. Jose A. Estenssoro, Cedric Bridger, James
R. Lesch, Peter Gaffney and P. Dexter Peacock) (collectively, the
"Designees") to be elected to the Board of Directors on or about
ten days from the date of mailing of this Information Statement
(the "Election Date"). See "The Board of Directors and Designees
The Designees." The Company has advised YPF that it expects
ten current directors (Messrs. John T. Kimbell, Richard W.
Murphy, Jose Maria Perez Arteta, J. David Barnes, B. Clark
Burchfiel, Bruce B. Dice, Michael C. Forrest, Charles W. Hall,
Raymond A. Hay and W. Thomas York) (collectively, the "Resigning
Directors") to submit their resignations from the Board of
Directors, effective as of the Election Date, while Messrs.
Charles L. Blackburn, George L. Jackson and R.A. Walker are
expected to continue to serve on the Board of Directors (the
"Continuing Directors"). See "The Board of Directors and
Designees The Current Board of Directors." Upon the
effectiveness of the resignations of the Resigning Directors, the
Continuing Directors intend to elect the Designees to the Board
of Directors to fill five of the ten vacancies created thereby.
As a result of the foregoing, on the Election Date, the Board of
Directors will consist of the five Designees and three Continuing
Directors with five vacancies, constituting the quorum required
by the Company's By-Laws (the "By-Laws").
2
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CHANGE OF CONTROL
By reason of its beneficial ownership of approximately 85.3%
of the outstanding Voting Shares, the designation of the five
Designees to be elected to the Board of Directors and the
transactions contemplated by the Merger Agreement, YPF may be
deemed to control the Company. See "Source and Amount of Funds"
for a discussion of the source and amount of consideration used
by the Purchaser to acquire a controlling equity interest in the
Company.
THE BOARD OF DIRECTORS AND DESIGNEES
General. The By-Laws provide that the number of directors
shall be fixed by the Board of Directors and shall be no fewer
than 12 nor more than 16. The directors, other than those who
may be elected by the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon
liquidation, are classified with respect to the time for which
they severally hold office into three classes, as nearly equal in
number as possible. Each class has a three-year term.
Currently, the Board of Directors consists of 13 directors.
There are four directors whose terms will expire at the Company's
Annual Meeting of Stockholders in 1997, four directors whose
terms will expire in at the Company's Annual Meeting of
Stockholders in 1996 and four directors whose terms will expire
at the Company's Annual Meeting of Stockholders in 1995. In
addition, one director (Mr. R.A. Walker) serves as a director of
the Company pursuant to the terms of, and at the election of the
holder of, the Company's $9.75 Cumulative Convertible Preferred
Stock, par value $1.00 per share (the "$9.75 Preferred Stock").
The Designees. The name, age, present principal occupation
or employment and the material occupations, positions, offices or
employments for the past five years of each Designee are set
forth below. Unless otherwise indicated, each such person has
held the principal occupation or employment listed opposite his
name for at least the past five years.
Present Principal Occupation or
Material Positions Held During
Name Age the Past Five Years
---------------------- ----- ------------------------------
Jose A. Estenssoro 61 Mr. Estenssoro has been a
Director of YPF since 1991
and President since 1990. He
has been associated with YPF
since 1990, when he was
appointed Trustee by the
Argentine Government. From
1987 through 1989, he was
President of Compania Sol
Petroleo S.A., and
previously, from 1962 to
1987, he occupied various
executive positions with
Hughes Tool Company, where he
was named President in 1987.
Cedric Bridger 59 Mr. Bridger has been Vice
President, Finance and
Corporate Development of YPF
since 1992. Before joining
YPF, he was Marketing Manager
for CVB Industrias Mecanicas
in Brazil from 1989. Prior
thereto, he was associated
with Hughes Tool Company.
3
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60 Mr. Gaffney is currently a
Peter Gaffney Senior Partner of Gaffney,
Cline & Associates ("Gaffney,
Cline"), a company engaged in
oil management consulting.
He has been involved with
such firm since 1962, being
one of the founders.
James R. Lesch 73 Mr. Lesch has been a Director
of YPF since 1993. He is
currently retired. He was
Chief Executive Officer
(1979-1986) and Chairman of
the Board (1981-1986) of
Hughes Tool Company and also
served as Commissioner, State
of Texas Department of
Commerce (1988-1992).
Previously, he served as
Director of the American
Petroleum Institute.
P. Dexter Peacock 53 Mr. Peacock has been a
partner of Andrews & Kurth
L.L.P. since 1975. He is a
member of the firm's
Management Committee. He
currently serves as a
Director of Texas Commerce
Bank National Association.
The Current Board of Directors. Certain information
regarding each of the current directors of the Company is set
forth below. Unless otherwise indicated, each such person has
held the principal occupation listed opposite his name for at
least the past five years.
Present Principal Occupation or
Material Positions Held During
Name Age the Past Five Years
------------------- ---- ----------------------------------
J. David Barnes 65 Mr. Barnes has been a Director of
the Company since 1971. He is a
member of the Compensation
Committee, the Executive Committee
and the Board Organization
Committee. He is also Chairman
emeritus of Mellon Bank Corporation
and Mellon Bank, N.A. in
Pittsburgh, Pennsylvania.
Charles L. Blackburn 67 Mr. Blackburn has been a Director
of the Company since 1986. He is a
member of the Executive Committee
and the Board Organization
Committee and is the Chairman,
President and Chief Executive
Officer of the Company. Mr.
Blackburn also serves as a Director
of Lone Star Technologies, Inc. and
Landmark Graphics Corporation.
B. Clark Burchfiel 60 Dr. Burchfiel has been a Director
of the Company since 1989. He is a
member of the Compensation
Committee. He is the Schlumberger
Professor of Geology at the
Massachusetts Institute of
Technology.
4
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68 Mr. Dice has been a Director of the
Bruce B. Dice Company since 1987. He is a member
of the Audit Review Committee and
the Board Organization Committee.
He is an oil and gas consultant and
President of Dice Exploration
Company, Inc., a company engaged in
the business of oil and gas
consulting in Houston, Texas and
President of Wadi Petroleum Inc., a
family-owned production company.
Formerly, he was President of
Transco Exploration Company,
Houston, Texas.
Michael C. Forrest 61 Mr. Forrest has been a Director of
the Company since 1992. He is a
member of the Executive Committee
and has served as Senior Vice
President, Business Development of
the Company since 1994. Prior
thereto, he was Vice Chairman and
Chief Operating Officer of the
Company. Prior to joining the
Company in 1992, he was associated
with Shell U.S.A. for more than
five years, last serving as
President of its subsidiary, Pecten
International Company.
Charles W. Hall 64 Mr. Hall has been a Director of the
Company since 1991. He is a member
of the Compensation Committee and
the Board Organization Committee.
Mr. Hall is a senior partner in the
law firm of Fulbright & Jaworski,
L.L.P., in Houston, Texas. Mr.
Hall also serves as a Director of
Texas Medical Center and Friedman
Industries, Inc., in Houston,
Texas.
Raymond A. Hay 65 Mr. Hay has been a Director of the
Company since 1979. He is a member
of the Audit Review Committee. He
is also the Chairman of Aberdeen
Associates, an investment company.
Previously, he was the Chief
Executive Officer of The LTV
Corporation. Mr. Hay also serves
as a Director of National Medical
Enterprises, Inc.
George L. Jackson 66 Mr. Jackson has been a Director of
the Company since 1987. He is a
member of the Compensation
Committee and the Board
Organization Committee. Mr.
Jackson is an oil field service
consultant in Kerrville, Texas.
John T. Kimbell 69 Mr. Kimbell has been a Director of
the Company since 1974. He is a
member of the Executive Committee
and the Audit Review Committee.
Mr. Kimbell is the President of
John Kimbell Associates, a business
consulting firm in Boston,
Massachusetts.
Jose Maria Perez 60 Dr. Perez Arteta has been a
Arteta Director of the Company since 1994.
He is a member of the Audit Review
Committee. He is a partner in the
law firm of Perez, Bustamante y
Perez in Quito, Ecuador.
5
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Richard W. Murphy 65 Mr. Murphy has been a Director of
the Company since 1990. He is a
member of the Compensation
Committee. Mr. Murphy is a senior
fellow for the Middle-East, Council
on Foreign Relations and a
consultant at Kissinger Associates
in New York City. Mr. Murphy is
also a member of the Board of
Advisors of the Naval War College
and the Chairman of the Chatham
House Foundation (U.S.) and the
Middle East Institute.
R.A. Walker 38 Mr. Walker has been a Director of
the Company since 1994. He is the
Managing Director of Prudential
Capital Group and Vice President of
The Prudential Insurance Company of
America ("Prudential"). Mr. Walker
has held similar positions with
Prudential Capital Group for the
past five years. He was elected to
the Board of Directors by
Prudential pursuant to the terms of
the $9.75 Preferred Stock.
W. Thomas York 61 Mr. York has been a Director of the
Company since 1978. He is a member
of the Audit Review Committee.
Previously, he was Chairman of the
Board and Chief Executive Officer
of AMF Incorporated in White
Plains, New York.
The Committees of the Board of Directors; Committee
Meetings. The Board of Directors held a total of eight meetings
in 1994. The percentage of meetings attended by each director
out of the total number of meetings of the Board of Directors and
of committees of the Board of Directors on which such director
served exceeded 75%. The Board of Directors established four
committees to assist in the discharge of its responsibilities.
The committee membership of each director is set forth above in
"The Current Board of Directors."
Executive Committee. The Executive Committee may exercise
many of the powers of the Board of Directors in the management of
the business and affairs of the Company in the intervals between
meetings of the Board of Directors. Although this Committee has
very broad powers, in practice it meets only when it would be
impractical to call a meeting of the Board of Directors. This
Committee did not meet in 1994.
Audit Review Committee. The Audit Review Committee reviews
the professional services provided by the Company's independent
accountants and the independence of such accountants from
management of the Company. This Committee also reviews the scope
of the audit coverage, the annual financial statements of the
Company and such other matters with respect to the accounting,
auditing and financial reporting practices and procedures of the
Company as it may find appropriate or as have been brought to its
attention. This Committee met five times in 1994.
Compensation Committee. The Compensation Committee reviews
and approves executive salaries and administers bonus, stock
option and incentive compensation plans of the Company. This
Committee advises and consults with management regarding
significant employee benefit policies and practices and
significant compensation policies and practices of the Company.
This Committee met seven times in 1994.
6
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Board Organization Committee. The Board Organization
Committee considers and recommends criteria for the selection
of nominees for election as directors and selects for presenta-
tion to the Board of Directors recommended candidates for
director. This Committee also considers on a continuing basis
the composition, structure and functioning of the Board of
Directors and its committees, reviews succession plans for the
Chairman and Chief Executive Officer of the Company and considers
nominations for corporate officer positions. This Committee met
three times in 1994.
The By-Laws provide that nominations of candidates for
director will be made by the Board of Directors or a committee
appointed by the Board of Directors or by any stockholder
entitled to vote in the election of directors generally. The By-
Laws require that stockholders intending to nominate candidates
for election as directors deliver written notice thereof to the
Secretary of the Company not later than 80 days in advance of the
meeting of stockholders; provided, however, in the event the date
of the meeting is not publicly announced by the Company by mail,
press release or otherwise more than 90 days prior to the
meeting, notice by the stockholder to be timely must be delivered
to the Secretary of the Company not later than the close of
business on the tenth day following the day on which such
announcement of the date of the meeting was communicated to
stockholders. The By-Laws further require that the notice set
forth certain information concerning such stockholder and his
nominees, including their names and addresses, a representation
that the stockholder is entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, a
description of all arrangements or understandings between the
stockholder and each nominee, such other information as would be
required to be included in a proxy statement soliciting proxies
for the election of the nominees of such stockholder and the
consent of each nominee to serve as a director of the Company if
so elected. The chairman of the meeting may refuse to
acknowledge the nomination of any person not made in compliance
with these requirements.
Directors' Compensation. The Company pays each director who
is not an employee of the Company an annual retainer of $20,000
and a fee of $1,000 for each meeting of the Board of Directors
attended and for Board of Directors' committee meetings attended
on days other than those on which the Board of Directors meets.
Non-employee directors automatically participate in the Director
Stock Compensation Plan (the "Stock Compensation Plan"). Under
the Stock Compensation Plan, non-employee directors who do not
defer their annual retainer under the deferred compensation plan
described below receive, in lieu of that portion of their annual
retainer allocable to four months in a given calendar year, a
number of shares of Common Stock equal to 34% of the amount of
their annual retainer ($6,800 in 1994) divided by the closing
market price of the shares of Common Stock as of the end of such
four-month period, rounded down to the nearest whole share. If a
director defers only a portion of his annual retainer or ceases
to be a director during the applicable four-month period, the
number of shares of Common Stock he receives in lieu of his
annual retainer is proportionally reduced. Under a deferred
compensation plan, the annual retainer and/or meeting fees may be
deferred in whole or in part at the election of the director.
Compensation so deferred may be denominated in dollars or in
shares of Common Stock determined by reference to the market
price on the business day immediately preceding the date of
credit. Share-denominated accounts will be credited with
dividends, if any, and dollar amounts will bear interest at a
rate indexed to an investment fund selected from time to time by
the plan's administrator. The annual rate of such interest
accruals for 1995 is 5.34%. The non-employee directors also
participate in the 1992 Director Stock Option Plan (the "1992
7
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Director Plan"). Under the 1992 Director Plan, non-employee
directors receive grants of options to purchase 10,000 shares of
Common Stock each when first elected and when re-elected as a
director. Such options generally are not exercisable for six
months, are for a ten-year term, have an exercise price equal to
the closing market price on the day preceding the grant date and
are not transferable except by will or the laws of the descent
and distribution. The directors may participate in the Company's
health insurance program available to all employees. In view of
the proposed Merger, the operation of the Stock Compensation Plan
and the 1992 Director Plan was suspended as of March 28, 1995.
Also, see "Executive Officers" for a description of certain
arrangements or understandings with Messrs. Gaffney and
Blackburn.
Upon the resignation of the Resigning Directors and the
election of the Designees to the Board of Directors, the Company
expects that certain of the Designees and the Continuing
Directors will be appointed to certain of the committees
described above. The Company anticipates that, after the
Election Date, the Board of Directors will review the committee
structure, retirement policy and compensation arrangements of the
Board of Directors and the Board of Directors reserves the right
to make such changes as it deems necessary or appropriate.
Certain Transactions and Relationships. The Company has
business transactions and relationships in the ordinary course of
business with unaffiliated corporations and institutions of which
certain of its directors, executive officers and substantial
stockholders are affiliated, including the transactions discussed
below. All such transactions are conducted on an arm's length
basis.
Prudential is the record or beneficial owner of more than 5%
of one or more of the classes of the Company's voting securities.
Mr. Walker, an officer of Prudential, was elected as a Director
of the Company by Prudential as the holder of all of the $9.75
Preferred Stock pursuant to the terms thereof. During 1994, the
Company offered its employees the opportunity to participate in
medical programs administered by Prudential. In addition, during
such year, Prudential provided services and coverages relating to
pension and life insurance plans for retired employees of Gateway
Coal Company, a partnership owned by the Company. Further,
Prudential provided the Company certain software-related services
in 1994. The Company has paid or will pay Prudential
approximately $377,000 for these services. The Company and
Prudential have agreed that Prudential will continue to perform
such services during 1995 and anticipate that the fees for the
year will be somewhat higher.
On February 28, 1995, the Company and Prudential entered
into an agreement pursuant to which Prudential agreed to consent
to the Merger and, upon consummation of the Merger, to (i) waive
certain rights, (ii) waive certain covenants restricting the
Company's ability to take certain actions, and (iii) terminate
the registration rights associated with the $9.75 Preferred
Stock. Pursuant to this agreement, the Company has agreed to (i)
waive certain rights, including the right to redeem the $9.75
Preferred Stock at its option and its right of first offer with
respect to the transfer of the shares of $9.75 Preferred Stock,
and (ii) pay to Prudential a restructuring fee of $250,000 upon
consummation of the Merger.
In 1994, the Company paid approximately $140,000 to the law
firm of Perez, Bustamente y Perez for legal services rendered in
connection with various matters. Dr. Perez Arteta, a Director of
the Company, is a partner in Perez, Bustamente y Perez.
8
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Dr. Burchfiel has from time to time served the Company by
conducting training workshops and seminars, performing geological
research and furnishing consultation with respect to selected
potential exploration projects. As consideration for these
services in 1994, approximately $32,600 was paid to Dr. Burchfiel
individually and approximately $147,000 was paid to Massachusetts
Institute of Technology, where Dr. Burchfiel is a professor of
geology.
In 1994, the Company paid approximately $218,000 to Mr. D.L.
Black, a former director of the Company, for services rendered in
connection with the sale of the Company's geothermal business.
Mr. Black retired as director of the Company in May 1994.
Gaffney, Cline provided oil and gas technical and management
consulting services to the Company in 1994. Mr. Gaffney, a
Designee who is expected to be named interim Chief Executive
Officer of the Company on the Election Date, is a Senior Partner
of Gaffney, Cline. The Company paid Gaffney, Cline approximately
$144,300 in 1994 for these services. The Company and Gaffney,
Cline have agreed that Gaffney, Cline will continue to provide
such services during 1995 and anticipate that the fees for such
services will be approximately the same as in 1994.
EXECUTIVE OFFICERS
Officers are elected annually by the Board of Directors and
may be removed at any time by the Board of Directors. There are
no family relationships among the executive officers listed below
and there are no arrangements or understandings pursuant to which
any of them were elected as officers. It is expected that Mr.
Charles L. Blackburn will resign as Chairman, President and Chief
Executive Officer of the Company on the Election Date. YPF has
asked Mr. Blackburn to become an international consultant to YPF
and to remain a director of the Company. Under the proposed two-
year arrangement, Mr. Blackburn would be available to render
consulting services for a minimum of 60 days per year and would
be paid a retainer of $180,000 per year. Mr. Blackburn would
also be paid $3,000 per day for each day in excess of 60 days per
year in which he renders consulting services for YPF. He would
also be provided offices in Dallas and Buenos Aires. In
addition, Mr. Peter Gaffney, a Designee, is expected to be named
the interim Chief Executive Officer of the Company on the
Election Date. Mr. Gaffney is to receive $50,000 per month and
will be eligible to participate in the Company's benefit plans
for executive officers. This six-month arrangement between Mr.
Gaffney and YPF is to be effective as of April 1, 1995, is
renewable on mutual agreement and provides that, with respect to
the period before Mr. Gaffney is named interim Chief Executive
Officer, Mr. Gaffney will serve as an advisor to YPF with respect
to the Company. Except as aforesaid, no arrangements or
understandings exist between any executive officers of the
Company and any other persons pursuant to which such persons were
or are to be elected as executive officers.
The name, age, present principal occupation or employment
and the material occupations, positions, offices or employments
for the past five years of each of the current executive officers
of the Company are set forth below. Unless otherwise indicated,
each such person has held the principal occupation listed
opposite his name for at least the past five years, with
responsibilities of the general nature indicated by his title,
except as set forth below.
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Present Principal Occupation or Material
Name Age Positions Held During the Past Five Years
------------ ---- ----------------------------------------------
C.L. Blackburn 67 Chairman, President and Chief Executive
Officer. See "The Board of Directors and
Designees--The Current Board of Directors."
M.C. Forrest 61 Senior Vice President, Business Development.
See "The Board of Directors and Designees--The
Current Board of Directors."
S.G. Crowell 47 Senior Vice President, Producing Operations.
Mr. Crowell joined the Company in 1976 as a
geophysicist. Since such time, he has held
various positions with the Company, including
Senior Vice President, North American
Exploration and Production, and Vice
President, Administration. Mr. Crowell was
named Senior Vice President, Producing
Operations, in 1994.
G.W. Pasley 44 Senior Vice President, Finance and
Administration and Chief Financial Officer.
Mr. Pasley joined the Company in 1984 as
Associate Director of Investor Relations.
Since such time, he has held various
positions with the Company, including
Director of Communications, Vice President,
Human Resources and Senior Vice President,
Operations. Mr. Pasley was named Senior Vice
President, Finance and Administration and
Chief Financial Officer, in 1994.
M.J. Barron 45 Vice President and Treasurer. Mr. Barron was
elected Vice President and Treasurer of the
Company in 1994. Mr. Barron joined Natomas
Energy Company ("Natomas") in 1982 as a
Project Manager. Natomas was acquired by the
Company in 1983, and Mr. Barron has held
various positions with the Company, including
Director of Strategic Planning and Vice
President, Treasurer and Chief Financial
Officer, since such time.
G.R. Brown 52 Vice President and Controller.
M.J. Gentry 43 Vice President, Administration. Mr. Gentry
was named Vice President, Administration, in
1994. Mr. Gentry joined the Company in 1975
and has held various positions with the
Company, including Associate Director of
Management Information Systems Operations,
Assistant Treasurer, General Manager of Human
Resources, and Vice President, Human
Resources and General Services, since such
time.
M. Middlebrook 59 Vice President and General Counsel.
A former Vice President of the Company, L.E. Ardila, filed a
Form 3 dated November 8, 1993 that erroneously reported the
number of shares of Common Stock beneficially owned by him.
After becoming aware of such error, Mr. Ardila filed an amended
Form 3 dated January 13, 1995.
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EXECUTIVE OFFICER COMPENSATION
The following tables set forth all compensation awarded to, earned
by or paid to the executive officers named below in 1992, 1993 and 1994.
SUMMARY COMPENSATION TABLE
Long Term Compensation Awards
---------------------------------
<TABLE><CAPTION>
Annual
Compensation Restricted Securities All
------------
Name and Stock Underlying Other
Principal Position Year Salary($) Bonus($) Awards($) Options/SARs(#) Compensation($)
------------------ ---- -------- ------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
C.L. Blackburn 1994 519,996 200,000 0(1) 185,000 31,200(5)
Chairman, 1993 512,496 100,000 0 0 30,750(5)
President and Chief 1992 482,496 500,000 0 65,600 28,950(5)
Executive Officer
M.C. Forrest 1994 304,020 100,000 0 65,000 18,241(5)
Sr. Vice President 1993 298,020 75,000 0 0 17,881(5)
1992 213,345 85,000 0 50,000 91,508(6)
S.G. Crowell 1994 236,544 100,000 0(2) 75,000 14,193(5)
Sr. Vice President 1993 222,669 60,000 0 0 13,360(5)
1992 212,547 95,000 0 20,400 12,753(5)
G.W. Pasley 1994 208,440 100,000 0(3) 65,000 12,506(5)
Sr. Vice President 1993 197,640 45,000 0 0 11,930(5)
1992 183,540 82,500 0 24,500 11,012(5)
M. Middlebrook 1994 186,270 65,000 0(4) 28,000 11,176(5)
Vice President and 1993 182,520 30,000 0 0 10,951(5)
General Counsel 1992 176,895 75,000 0 12,000 10,614(5)
_________________________
</TABLE>
<TABLE>
<S> <C>
(1) As of December 31, 1994, Mr. Blackburn owned 19,016 shares of restricted stock having an aggregate
market value of $64,179.
(2) As of December 31, 1994, Mr. Crowell owned 6,260 shares of restricted stock having an aggregate
market value of $21,128.
(3) As of December 31, 1994, Mr. Pasley owned 3,756 shares of restricted stock having an aggregate
market value of $12,677.
(4) As of December 31, 1994, Mr. Middlebrook owned 2,712 shares of restricted stock having an aggregate
market value of $9,153.
(5) These payments represent the Company's matching contributions to the qualified and non-qualified
saving plans' accounts of the named executive officers.
(6) $81,708 of the amount shown for Mr. Forrest in the All Other Compensation column for 1992 are
associated with his relocation from Houston to Dallas upon his initial employment. The remainder,
$9,800, represents the Company's matching contribution to the qualified and non-qualified saving
plans' accounts of Mr. Forrest for that year.
Pursuant to the Merger Agreement, effective immediately prior to the Effective Time, the
restrictions on all shares of restricted Common Stock will lapse.
</TABLE>
11
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
----------------------------------------
<TABLE><CAPTION>
Percent of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Expiration Present
Name Granted (#) (1) Fiscal Year Price ($/Sh) Date Value($)(2)
--------------- -------------- ------------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
C. L. Blackburn 185,000 34.37% 5.00 6/17/04 555,000
M.C. Forrest 65,000 12.43% 5.00 6/17/04 226,850
S.G. Crowell 75,000 14.34% 5.00 6/17/04 268,500
G.W. Pasley 65,000 12.43% 5.00 6/17/04 232,700
M. Middlebrook 28,000 5.35% 5.00 6/17/04 100,240
________________________
</TABLE>
<TABLE>
<S> <C>
(1) The named executive officers were granted the stated number of options and a like number of SARs
in tandem with the options. Both the options and tandem SARs become exercisable on June 16,
1995.
(2) The grant date present value was determined using a variation of the Black-Scholes option
pricing model. In determining such value, the expected volatility of the Common Stock was
assumed to be 50%, the risk-free rate of return was based on zero coupon Treasury yields as
listed in The Wall Street Journal on June 16, 1994 for trading activity on June 15, 1994
(ranging from 5.09% to 7.31%), no dividend yield was assumed since dividends are not currently
paid on Common Stock, and the time of exercise was assumed to be immediately before expiration
of the options. No adjustments were made for non-transferability or risk of forfeiture, except
that an adjustment was made to reflect the probability of retirement based on actuarial
estimates and retirement no later than age 70.
</TABLE>
12
<PAGE>
<TABLE><CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN THE
LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Value of
Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options/SARs
Options/SARs at at Fiscal Year
Value Fiscal Year-End(#) End ($)
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
--------------- --------------- -------- ----------------- ---------------
<S> <C> <C> <C> <C>
C.L. Blackburn 0 N/A 271,933/185,000 0/0
M.C. Forrest 0 N/A 50,000/65,000 0/0
S.G. Crowell 0 N/A 85,214/75,000 0/0
G.W. Pasley 0 N/A 43,608/65,000 0/0
M. Middlebrook 0 N/A 38,583/28,000 0/0
</TABLE>
<TABLE>
<S> <C>
Change in Control Agreements. The Company has entered into agreements with Mr. Charles L.
Blackburn and each of the other named executive officers which were binding upon execution but become
operative only upon the occurrence of a change in control of the Company as defined therein. The
transactions contemplated by the Merger Agreement constitute a change of control for purposes of these
agreements.
Under these agreements, in the event of a change in control, the executive officer will be
entitled to continue in the employ of the Company until the earlier of the expiration of the third
anniversary of the occurrence of a change in control or the executive's death at an annual base salary
of not less than the rate in effect upon the occurrence of a change in control plus an incentive award
of not less than the highest such award received by the executive for any year in the three calendar
years immediately preceding the change in control. In the event the Company terminates the executive's
employment during such term without cause, the executive will be entitled to receive as severance
compensation a lump-sum payment equal to the present value of the cash compensation payable under the
agreement in the absence of such termination, not to exceed 299% of his "base amount" as defined in the
Internal Revenue Code of 1986, as amended (the "Code"), without any reduction for subsequent earnings.
Under these agreements, continuation of benefits under employee benefit plans of the Company is
provided after termination during the remainder of the original term of employment. The agreements
include provisions that limit the amounts payable under them in certain circumstances in which the net
after-tax amount received by the officer would be reduced as a result of the applicability of the 20%
excise tax imposed in respect of certain change in control payments under the Code. The Company has
assumed the obligation to pay certain fees and expenses of counsel incurred by the executive officers if
legal action is
</TABLE>
13
<PAGE>
required to enforce their rights under the agreements and has
secured such obligation by obtaining a letter of credit issued by
a commercial bank.
On April 7, 1995, all of the Company's executive officers
gave notice of their intent to resign under circumstances in
which they had the right to receive severance payments
thereunder. In order to facilitate the transition following such
event, the Company and its eight executive officers agreed that
the executive officers would continue to work for the Company in
their present positions at their current level of compensation
until June 30, 1995 or otherwise mutually agreed. The Company
also agreed to pay the executive officers such severance payments
no later than April 15, 1995. Pursuant to said agreement and the
change in control agreements, each of the executive officers
named in the Summary Compensation Table, and all executive
officers as a group, will receive the following amounts: Mr.
Blackburn, $2.7 million; Mr. Forrest, $1.0 million; Mr. Crowell,
$1.0 million; Mr. Pasley, $.9 million; Mr. Middlebrook, $.8
million; and all executive officers as a group, $8.2 million.
Separation Pay Plan. Under the Separation Pay Plan, most
employees (other than non-resident aliens), including Mr.
Blackburn and the other named executive officers, are eligible
for separation pay if their employment is terminated for any
reason other than death, voluntary termination of employment,
voluntary retirement or discharge for reasons of criminal
activity, willful misconduct, gross negligence in the performance
of duties or violation of Company policy. The payment to be
received under the plan by a particular employee depends on his
job classification and length of service and whether termination
occurs after the elimination of the employee's position or a
change in control of the Company (as defined in the plan). In
the case of the named executive officers, the plan provides in
most cases for separation pay in an amount equal to two-weeks'
base pay for each year of service with the Company, plus three
months' base pay, not to exceed a maximum of 12 months, base pay;
and, in the case of a change in control of the Company,
separation pay in an amount equal to one month's base pay for
each year of service with the Company, but not less than 12
months' base pay nor more than 24 months' base pay. The plan
requires that employees sign releases as a condition of receiving
separation pay. Executive officers are not entitled to
separation pay under the plan to the extent they receive
severance payments under the change in control agreements
discussed above. The transactions contemplated by the Merger
Agreement constitute a change in control for purposes of the
Separation Pay Plan.
Retirement Program. Effective February 1, 1987, the Company
adopted a new retirement income plan (the "New Retirement Income
Plan") applicable to most of its employees to replace the
Company's former retirement income plans under which such
employees ceased to accrue benefits on January 31, 1987. Under
the New Retirement Income Plan, a covered employee acquires a
right upon retirement to a yearly amount equal to 2% of the
employee's earnings during each year from February 1, 1987
forward (rather than on final compensation or average final
compensation) without offset for social security benefits.
Benefits under the New Retirement Income Plan become vested after
five years of service. Benefits may be paid in equal monthly
installments, starting on the date of retirement and continuing
until death, or employees may select one of a number of optional
forms of payment having equal actuarial value as provided in the
plan. The benefits payable under the New Retirement Income Plan
are subject to maximum limitations under the Employee Retirement
Income Security Act of 1974, as amended, and the Code. In the
case of the named executives,
14
<PAGE>
if benefits at the time of retirement exceed the then permissible
limits of such statutes, the excess would be paid by the Company
from the "SERP" described below.
The Company has an unfunded Supplemental Executive
Retirement Plan (the "SERP") that provides additional benefits to
the Company's highest ranking officer (Mr. Blackburn), the other
named executives and to certain executive employees designated by
said highest ranking officer. Under the SERP, a participant
acquires the right upon retirement to a lump sum amount which is
the actuarial equivalent of a straight life or, if married, a 50%
joint and survivor annuity payable monthly in an amount equal to
(i) the sum of (a) 1.6% of the participant's average monthly
compensation in 1986 times his years of service through January
31, 1987, plus (b) 2% of the participant's average monthly
compensation after January 31, 1987 times his years of service
after January 31, 1987 plus an additional five years less (ii)
the amount of the benefits calculated for such participant under
the Company's other retirement plans. The maximum benefit
payable is 60% of the participant's high three-year average pay.
The amounts calculated under the SERP are not subject to any
reduction for Social Security and are not determined primarily
by final compensation or average final compensation and years of
service. If a participant dies while still employed by the
Company and is survived by an eligible spouse, his surviving
spouse will receive a lump-sum payment equal to the present value
of one-half of the benefit which would have been payable to the
participant at his normal retirement age under the SERP assuming
he had terminated employment with the Company at the time of his
death with a vested interest under the SERP and that he survived
to his normal retirement age. In the case of retirement after
age 55 but before age 60, the supplemental retirement benefits
generally will be reduced by 5% for each year that the employee's
actual retirement date precedes age 60. The benefits provided
under the plan will vest upon completion of five years of service
or attainment of age 55.
The estimated annual benefits payable upon retirement at
normal retirement age (or January 1, 1995 in those cases where
the participant's age on that date was greater than normal
retirement age) under the Company's retirement plans as
supplemented by the SERP based on service and compensation
through December 31, 1994 for the executive officers named in the
compensation table are as follows: Mr. Blackburn: $180,699; Mr.
Forrest: $60,200; Mr. Crowell: $96,224; Mr. Pasley: $54,227; and
Mr. Middlebrook: $63,380.
Whether any amounts actually become payable in whole or in
part depends on the contingencies and conditions governing the
applicable retirement plan.
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
General
The Compensation Committee of the Board of Directors (the
"Committee") is composed of five directors who are not current or
former officers or employees of the Company. The Committee is
responsible for reviewing and approving the compensation paid to
executive officers of the Company, including salaries, bonuses,
stock options and other incentive awards. Following review and
approval by the Committee, material actions pertaining to
executive compensation are reported to the full Board of
Directors.
15
<PAGE>
Compensation Policy for Executive Officers
The Committee's policy regarding executive pay is generally
the same as the Company's policy with respect to all other
management level employees. That policy has the following
objectives:
- to enhance the Company's competitiveness by attracting
and retaining quality talent
- to link employee's long-term earnings to the long-term
success of the Company
- to reward individual performance as well as team
accomplishments
- to and target each component of total compensation at the
50th percentile range for similar jobs, as determined by
reference to a survey or surveys of selected oil and gas
companies1
The Committee continuously attempts to assess the
reasonableness and competitiveness of the Company's compensation
program and to ensure that the program is adequately designed to
attract, motivate and retain talented executives, and also to
have linkage between executive compensation and Common Stock
value. The Committee's practice has been to retain an
independent outside consultant, at intervals of approximately
five years, to assist it in this regard by making an independent
assessment. The last such independent assessment was conducted
in 1993.
The Company does not believe it will pay any employee
compensation in 1995 that will cause it to exceed the $1 million
deduction limit under Section 162(m) of the Internal Revenue Code
of 1986, as amended. If it appears that employee compensation
will exceed the deduction limit in the future, the Company
presently intends to comply with Section 162(m) as circumstances
allow, unless the Committee determines that required changes
would not be in the Company's best interest.
Components of Compensation
Base Salary. The Committee annually reviews the Chief
Executive Officer's and the other executive officers' base
salaries. In determining an appropriate salary adjustment,
--------------------
1 The Committee reviewed survey information for 19 U.S.
based independent oil and gas companies to determine the
50th percentile of total compensation for comparable
executive positions, including all of the U.S. based
companies included in the performance graph. These 19
companies were selected because they participated in
compensation surveys performed by an independent
consultant and reviewed by the Committee (the
"Compensation Survey"). The performance of these
companies was not considered in determining the Company's
executives' compensation. The non-U.S. based companies
included in the performance graph were not included
because they did not participate in the Compensation
Survey and the Committee believes there are significant
differences between compensation practices of U.S. based
and non-U.S. based oil and gas companies.
16
<PAGE>
consideration is given to level of responsibility, experience of
the individual, the degree to which planned objectives were
achieved and competitiveness of the executive's compensation. As
stated above, the Company targets total compensation at the 50th
percentile range for similar positions at other U.S. based
independent oil and gas companies. Based on the Compensation
Survey, the average of the Company's executive officers' base
salaries as of April 1994 was on, average, seven percentage
points below the targeted levels.
Mr. Blackburn (the "CEO") has been the Chairman, President
and Chief Executive Officer of the Company since 1987. His base
salary did not increase in 1994. The Committee determined not to
increase the CEO's base salary in 1994 since his monthly base
rate (after giving effect to his 6.1% salary increase in April
1993) approached the targeted level. The CEO's base salary as of
April 1994 was two percentage points below the median level for
similar positions in the Compensation Survey.
Annual Incentives. The CEO and other executive officers are
considered for annual bonus incentive awards to reward individual
performance against established objectives. The total award pool
for all eligible employees is first calculated as the sum of a
percentage of base salary for each eligible position. The target
percentage for each position is established by reviewing the
Compensation Survey information. The percentage of base salary
targeted for annual bonus increases with the level of
responsibility. This award pool can be adjusted 50% up or down
based on actual performance of the Company as measured against
the targets for cash flow and return on capital employed as
established in the annual plan of the Company. Further
adjustments may be made for unusual events or events outside the
control of the Company's management, such as variances due to the
price of oil and gas. Individual amounts are awarded to the CEO
and each executive officer on a discretionary basis after
reviewing the officer's performance against various factors,
including established objectives that vary by executive, internal
equity with any other officers with similar responsibilities and
the established target award for the position being considered.
The bonus pool for executive officers for 1994 was below the
$831,000 targeted amount with $727,000 being awarded to eight
individuals within this group. The reasons the executive
officers were awarded less than the targeted amount were that the
Company did not meet its 1994 objectives with respect to cash
flow and return on capital employed. Based on the Company's
performance with respect to these objectives, the 1994 bonus pool
for the eight executive offers should have been 97.3% of the
targeted amount (or $808,000); however, the Committee made the
subjective determination to reduce the award amount further due
to the performance of the Common Stock in 1994.
The CEO was granted a bonus of $200,000 in December 1994 (or
approximately 38% of his base salary). The Committee awarded
this amount based upon its evaluation of the CEO's performance in
connection with restructuring activities during 1994. The
restructuring, activities have led to an estimated reduction in
overhead of approximately $8 million per year, the successful
sale of the Company's gulf coast properties, the refocusing on
certain core areas of operations and the development of various
funding options to support the Company's future operations.
Long-Term Incentives. The Company's stockholders have
approved the Company's virtually identical 1986 and 1992 Long-
Term Incentive Plans (the "Plans"). The Plans permit granting
officers and other key employees of the Company stock options,
stock appreciation
17
<PAGE>
rights ("SARs"), performance units and awards of Common Stock
(including restricted stock) or other securities of the Company
on terms and conditions determined by the Committee. The
Committee believes that these equity based awards are an integral
part of the Company's overall compensation program for the CEO
and other executive officers. Through these grants, the actual
amount of such officers' long-term compensation is dependent on
future increases in stockholder value.
During 1994, the Company granted options and tandem SARs to
the CEO and other executive officers. As previously reported,
the Committee presently intends (assuming the proposed merger
with YPF Acquisition Corp. is not consummated) to consider
granting this group of employees options/SARs every other year
and performance units in years in which options/SARs are not
awarded. Various factors may be taken into account in
considering the number of options an individual is granted,
including performance in achieving the Company's strategic plan
objectives, level of responsibility and survey information
reflecting the value of awards to similar positions at other oil
and gas companies. The CEO and executive officers are granted
SARs in tandem with the stock options. SARs entitle the holder,
upon exercise and contemporaneous surrender and cancellation of
the related options, to receive cash or stock, or a combination
of both, in an amount equal to the difference between the market
value of the Common Stock (calculated as specified in the Plans
on the date of exercise) and the exercise price of the SARs.
For purposes of stock options grants and comparisons of
competitive awards, options are valued according to a variation
of the Black-Scholes option pricing model. This type of pricing
model is used to value options traded in public markets. The
option exercise price is set at the closing market price of the
Common Stock preceding the day of the grant and the Company does
not adjust the exercise price for drops in the price of the
Common Stock.
In June 1994, the CEO was granted the option to purchase
185,000 shares of Common Stock at a price of $5.00 per share.
SARs were also issued in tandem with these options. The grant
was based on survey date reflecting the value of awards to
similar positions at other oil and gas companies. The Committee
believes that, like the use of performance units, the use of
options serves to help align the compensation of the CEO and
other executive officers with interest of the stockholders.
Specifically, the options will only have value if the market
value of the Common Stock increases after the date of grant.
Members of the Compensation Committee:
J. David Barnes, Chairman
B. Clark Burchfiel
Charles W. Hall
George L. Jackson
Richard W. Murphy
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth the beneficial ownership (as
defined in the rules of the Securities and Exchange Commission)
as of March 31, 1995 of the Company's equity securities of the
directors, the named executive officers and all directors and
executive officers as a group. At such date, all directors and
executive officers as a group beneficially owned less
18
<PAGE>
than 1% of the $4.00 Preferred Stock outstanding and less than
1% of the Common Stock outstanding. None of the directors or
executive officers beneficially owned any shares of the Company
$9.75 Preferred Stock or $2.50 Cumulative Preferred Stock (the
"$2.50 Preferred Stock").
<TABLE><CAPTION>
Amount and Nature
of Securities
Name of Beneficial Owner Title of Security Beneficially Owned (1)
------------------------- ------------------- ----------------------
<S> <C> <C>
J. David Barnes . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2)
$4.00 Preferred Stock . . . . . . . 0
C.L. Blackburn . . . . . . . . . . . . . Common Stock . . . . . . . . . . . .
290,949 (3)
$4.00 Preferred Stock . . . . . . . 0
B. Clark Burchfiel . . . . . . . . . . . Common Stock . . . . . . . . . . . . 10,000 (2)
$4.00 Preferred Stock . . . . . . . 0
S.G. Crowell . . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 91,474 (3)
$4.00 Preferred Stock . . . . . . . 0
Bruce B. Dice . . . . . . . . . . . . . . Common Stock . . . . . . . . . . . .
10,000 (2)
$4.00 Preferred Stock . . . . . . . 0
Michael C. Forrest . . . . . . . . . . . Common Stock . . . . . . . . . . . . 50,000
$4.00 Preferred Stock . . . . . . . 0
Charles W. Hall . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 10,000 (2)
$4.00 Preferred Stock . . . . . . . 0
Raymond A. Hay . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 10,319 (2)
$4.00 Preferred Stock . . . . . . . 0
George L. Jackson . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2)
$4.00 Preferred Stock . . . . . . . 0
John T. Kimbell . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2)
$4.00 Preferred Stock . . . . . . . 0
M. Middlebrook . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 41,295 (3)
$4.00 Preferred Stock . . . . . . . 133
Richard W. Murphy . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2)
$4.00 Preferred Stock . . . . . . . 0
George W. Pasley . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 47,364 (3)
$4.00 Preferred Stock . . . . . . . 0
19
<PAGE>
Amount and Nature
of Securities
Name of Beneficial Owner Title of Security Beneficially Owned (1)
------------------------- ------------------- ----------------------
Jose Maria Perez Arteta . . . . . . . . . Common Stock . . . . . . . . . . . . 10,000 (2)
$4.00 Preferred Stock . . . . . . . 0
R.A. Walker . . . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 10,000 (2)(4)
$4.00 Preferred Stock . . . . . . . 0
W. Thomas York . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2)
$4.00 Preferred Stock . . . . . . . 0
Directors and executive . . . . . . . . . Common Stock . . . . . . . . . . . .
857,004 (2)(3)(4)
officers as a group $4.00 Preferred Stock . . . . . . . 133
________________________
</TABLE>
(1) These amounts include shares of Common Stock covered by
options exercisable within 60 days, as follows: Mr. Barnes,
20,000; Mr. Blackburn, 271,933; Dr. Burchfiel, 10,000; Mr.
Crowell, 85,214; Mr. Dice, 10,000; Mr. Forrest, 50,000; Mr.
Hall, 10,000; Mr. Hay, 10,000; Mr. Jackson, 20,000; Mr.
Kimbell, 20,000; Mr. Middlebrook, 38,583; Mr. Murphy,
20,000; Mr. Pasley, 43,608; Dr. Perez Arteta, 10,000; Mr.
Walker, 10,000; Mr. York, 20,000; and all directors and
executive officers as a group, 817,009. Pursuant to the
Merger Agreement, the Company has agreed to offer the
holders of employee and director stock options, including
all current directors and executive officers of the Company,
the opportunity to surrender their options, including any
related stock appreciation rights, in exchange for amounts
determined in accordance with the provisions of Schedule 2.6
to the Merger Agreement, which schedule is based, in
general, on the Black-Scholes methodology for valuing
options. If all such options are surrendered, the holders
thereof, including certain directors and executive officers
of the Company, will receive an aggregate amount of
approximately $4.7 million. Of that amount, the executive
officers named in the table above, all executive officers of
the Company as a group, and all directors of the Company as
a group would receive approximately the following amounts:
Mr. Blackburn, $1,100,000; Mr. Forrest, $385,000; Mr.
Crowell, $390,000; Mr. Pasley, $335,000; Mr. Middlebrook,
$160,000; the executive directors as a group, $2,900,000;
and all directors of the Company (other than Messrs.
Blackburn and Forrest) as a group, $545,000.
(2) These amounts do not include $6,800 worth of Common Stock
the non-employee directors are entitled to under the Stock
Compensation Plan, which such directors are expected to
receive in April 1995. Assuming a market value of $5.50 per
share of Common Stock, each such non-employee director will
receive 1,236 shares of Common Stock not reflected above.
(3) These amounts include shares of "restricted stock" i.e.,
Common Stock subject to restriction for a period of years,
as to which the holders have sole voting power, but not
investment power, during the restricted period, as follows:
Mr. Blackburn, 19,016; Mr. Crowell, 6,260; Mr. Pasley 3,756;
Mr. Middlebrook, 2,712; and all directors and executive
officers as a group, 38,424. The Merger Agreement provides
that all restrictions on restricted stock will lapse at the
Effective Time. The aggregate value of all such restricted
stock, based on the $5.50 per share of Common Stock
20
<PAGE>
price to be paid in the Merger, is approximately $5.2
million. Of that amount, the executive officers named in
the table above and all executive officers as a group would
receive the following amounts: Mr. Blackburn, $104,558; Mr.
Forrest, $0; Mr. Crowell, $34,430; Mr. Pasley, $20,658; Mr.
Middlebrook, $14,916; and all executive officers as a group,
$215,000.
(4) Does not include shares owned by Prudential, as to which Mr.
Walker disclaims beneficial ownership.
To the knowledge of the Company, and with the exception of
the ownership of 2,000 shares of Common Stock by Mr. Lesch, none
of the Designees beneficially owns any equity securities of the
Company.
To the knowledge of the Company, as of March 31, 1995, no
person beneficially owned more than 5% of any class of the
Company's voting securities except as set forth below:
<TABLE><CAPTION>
Amount and
Nature of
Shares
Beneficially Percent
Name and Address or Beneficial Owners Title of Class Owned of Class
------------------------------------- -------------- --------- --------
<S> <C> <C> <C>
YPF Acquisition Corp.. . . Common Stock 119,339,683 (1) 88.0%
Avenida Pte. Roque
Saenz Pena 777
1364 Buenos Aires
Argentina
YPF Sociedad Anonima.. . . Common Stock 119,339,683 (2) 88.0%
Avenida Pte. Roque
Saenz Pena 777
1364 Buenos Aires
Argentina
The Prudential Insurance Company
of America . . . . . . . Common Stock 8,039,242 (3)(4) 5.6%
Prudential Plaza $9.75 Preferred 1,250,000 (4) 100.0%
Stock
Newark, New Jersey 07102-3777
Kidder, Peabody Group Inc. Common Stock 8,000,000 (5) 5.6%
10 Hanover Square
New York, New York 10005
</TABLE>
_________________
(1) Consists of shares of Common Stock held of record by the
Purchaser.
(2) Consists of shares of Common Stock held of record by the
Purchaser, which may be deemed to be beneficially owned
by YPF by reasons of YPF's direct beneficial ownership of
100% of the capital stock of the Purchaser.
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(3) Prudential reported on Amendment No. 6 to Schedule 13G, dated
January 31, 1995, in connection with beneficial ownership at
December 31, 1994, that it had sole dispositive and voting power
with respect to 59,837 shares of Common Stock indicated
above as beneficially owned by it, shared voting power
with respect to 66,305 of such shares of Common Stock and
shared dispositive power with respect to 69,405 of such
shares of Common Stock. Prudential indicated that it
may have direct or indirect voting and/or investment
discretion over 129,242 of such Shares which were held for
the benefit of its clients by its separate accounts,
externally managed accounts, registered investment
companies and/or other affiliates. It also indicated that
the remainder of shares of Common Stock reported by it resulted
from the assumed conversion of shares of $9.75
Preferred Stock. Except as provided in Footnote 4 below,
the information herein assumes that Prudential's ownership
has not changed as of March 3, 1995, and is included in
reliance on such Amendment No. 6.
(4) On February 28, 1995, the Company and Prudential entered
into an agreement pursuant to which Prudential has
waived certain rights, including conversion rights
and registration rights, subject to consummation of the
Merger. See "The Board of Directors and Designees
Certain Transactions and Relationships."
(5) Kidder, Peabody Group Inc. ("Kidder") reported on
Schedule 13D, dated October 10, 1992, that it owns 8,000,000
warrants, each representing the right to purchase from the
Company at any time prior to 5:00 p.m. on October 10, 1997,
one share of Common Stock at a price of $13.00 per share.
The 8,000,000 shares of Common Stock reported as beneficially
owned by Kidder result from the assumed exercise of all
8,000,000 of such warrants. According to said Schedule
13D, General Electric Company is the indirect parent of
Kidder. The information herein regarding such shares of
Common Stock assumes that Kidder's beneficial ownership
thereof had not changed as of March 31, 1995, and is included
herein in reliance in such filing, except that the
percent of class is based upon the Company's calculations
made in reliance upon the information regarding such
Shares contained in such filing.
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STOCK PERFORMANCE GRAPH
The following graph shows a comparison of five-year cumulative
returns (assuming reinvestment of any dividends), among the
Company, the Standard & Poor's 500 Stock Index and a peer group
selected by the Company.
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL RETURN AMONG THE COMPANY,
S&P 500 INDEX AND A PEER GROUP INDEX
Year-End
Data 1989 1990 1991 1992 1993 1994
-------- ----- ----- ----- ----- ---- ---
Maxus $100 $82.9 $67.1 $62.2 $54.9 $32.9
S&P 500 100 97.0 126.5 137.5 149.8 151.8
Peer Group 100 86.6 82.4 85.4 101.3 87.5
The stock performance graph assumes $100 was invested on
December 29, 1989 in the Common Stock, the S&P 500 Stock Index
and the peer group. Investments in the peer group have been
weighted according to the respective issuer's stock market
capitalization at the beginning of each period for which a return
is indicated.
The peer group is composed of 14 companies (named below)
whose primary business, like that of the Company, is exploring
for and producing oil and gas. The companies were selected to
represent a composite similar to the Company in size and mix of
domestic and international business. The group consists of large
independent exploration and production companies whose market
equity exceeded $500 million in 1990 or in the year in which data
for the company became available. The primary business of eight
companies is domestic, and
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six companies are primarily international. The performance index
is based upon data beginning with 1990 except for Lasmo plc which
was included in the index starting in 1992 when complete data for
the year became available. Also, the performance index does not
include Bow Valley Industries Ltd. for 1994 because it was
acquired by another company in that year. The 14 companies are:
Anadarko Petroleum Corporation, Apache Corporation, Bow Valley
Industries Ltd., Burlington Resources Inc., Canadian Occidental
Petroleum Ltd., Enron Oil & Gas Company, Enterprise Oil plc,
Lasmo plc, Louisiana Land & Exploration Company, Noble Affiliates
Inc., Oryx Energy Company, Ranger Oil Limited, Santa Fe Energy
Resources, Inc., and Union Texas Petroleum Holdings, Inc.
In the index used for the immediately preceding fiscal year,
the peer group did not include Apache Corporation or Ranger Oil
Limited because the market equity of each was less than $500
million; however, if a line representing the same group of
companies without Apache and Ranger were superimposed on the
above graph, it would be indistinguishable from the line on the
above graph representing the fourteen companies now included in
the group. The plot points for the line representing a group
without Apache and Ranger would be as follows for the year-ends
indicated: 1990 - $85.8; 1991 - $80.8; 1992 - $84.4; 1993 -
$100.2; 1994 - $84.8.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors
currently consists of Mr. Barnes, Chairman, Dr. Burchfiel, and
Messrs. Hall, Jackson and Murphy. Dr. Burchfiel has, from time
to time, served the Company by conducting training workshops and
seminars, performing geological research and furnishing
consultation with respect to selected potential exploration
projects. As consideration for these services in 1994,
approximately $32,600 was paid to Dr. Burchfiel individually and
approximately $147,000 was paid to Massachusetts Institute of
Technology.
SOURCE AND AMOUNT OF FUNDS
General. The total amount of funds required by the
Purchaser to acquire the entire common equity interest in the
Company, including the purchase of shares of Common Stock
pursuant to the Offer and the payment for shares of Common Stock
converted into the right to receive cash pursuant to the Merger,
and to pay related fees and expenses, is expected to be
approximately $800 million. On April 5, 1995, the Purchaser
entered into a credit agreement with lenders for which The Chase
Manhattan Bank (National Association) ("Chase") acts as agent,
pursuant to which the lenders extended to the Purchaser a $550
million loan facility (the "Purchase Facility"). On April 5,
1995, the Purchaser borrowed $442.2 million under the Purchaser
Facility and received a capital contribution of $250 million from
YPF. The Purchaser used such borrowings under the Purchaser
Facility and the funds contributed to it from YPF to purchase
shares of Common Stock pursuant to the Offer. The Company has
been advised by YPF and the Purchaser that the payment for shares
of Common Stock converted into the right to receive cash pursuant
to the Merger will be made from additional borrowings by the
Purchaser under the Purchaser Facility and from additional
capital contributions from YPF.
YPF has also received a commitment letter (the "Commitment
Letter") from Chase pursuant to which Chase has agreed to provide
two additional credit facilities aggregating up
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to $425 million: (i) a credit facility of up to $250 million to
be extended to Midgard Energy Company ("Midgard"), a wholly owned
subsidiary of the Company (the "Midgard Facility"), and (ii) a
credit facility of up to $175 million to be extended to certain
other subsidiaries of the Company as described below (the
"Subsidiaries Facility"). Revised term sheets for the Midgard
Facility and the Subsidiaries Facility are annexed to the Credit
Agreement for the Purchaser Facility. The proceeds of the
Midgard Facility and the Subsidiaries Facility will be used to
repay, in part, the Purchaser Facility. Chase has confirmed that
it is willing to provide the entire amount of these two
additional facilities. Chase also has advised YPF that it
intends to arrange one or more syndicates of commercial banks,
financial institutions and other investors to provide a portion
of these facilities and that it proposes to act as the agent for
such lenders in connection with each of the facilities.
The following is a description of the principal terms of the
Purchaser Facility and a description of the proposed terms of the
Midgard Facility and the Subsidiaries Facility.
Purchaser Facility. The Purchaser Facility provides for
loans in an aggregate amount of up to $550 million (collectively,
the "Purchaser Loan") and will mature on the earlier of (i) the
Effective Time and (ii) June 12, 1995 (such earlier date being
the "Purchaser Maturity Date"). The Purchaser borrowed $442.2
million under the Purchaser Facility on April 5, 1995, and may
obtain one additional advance thereunder up to the remaining
$107.8 million of credit available thereunder. At the
Purchaser's option, the interest rate applicable to the Purchaser
Loan is either (i) the one-month London Interbank Offered Rate
plus a margin of 21/4% or (ii) the Base Rate (defined in the
Credit Agreement relating to the Purchaser Facility) plus a
margin of 11/4%. The Purchaser Loan is guaranteed by YPF as
described below. In addition, prior to the Merger, the Purchaser
has agreed not to dispose of any such shares of Common Stock
except for cash at fair market value. The Lenders' obligation to
fund the remaining amount of credit available under the Purchaser
Facility is subject to certain conditions as described below. It
is anticipated that up to $125 million of the Purchaser Loan,
plus accrued interest on the Purchaser Loan, will be repaid on
the Purchaser Maturity Date from cash held by the Company.
Midgard Facility. The Company anticipates that Midgard will
provide the funds from the proceeds of a loan of up to $250
million (the "Midgard Loan") pursuant to the Midgard Facility.
The Midgard Loan will be made in a single drawing, will mature on
December 31, 2003 and will be repaid in up to 28 consecutive
quarterly installments commencing on March 31, 1997, subject to
semi-annual borrowing base redeterminations. At Midgard's
option, the interest rate applicable to the Midgard Loan will be,
until March 31, 1997, either (i) the one-, two- or three-month
London Interbank Offered Rate plus a margin of 13/4% or (ii) the
Base Rate (to be defined in the credit agreement relating to the
Midgard Facility) plus a margin of 3/4% and, thereafter, either
(iii) the one-, two- or three-month London Interbank Offered Rate
plus a margin of 21/4% or (iv) the Base Rate plus a margin of
11/4%. The Midgard Loan will not be secured but will be
guaranteed by YPF and the Company. The agreement evidencing the
Midgard Loan will contain, among other things, a negative pledge
on all assets of Midgard, subject to customary exceptions. The
lenders' obligation to fund the Midgard Loan will be subject to
certain conditions as described below. It is anticipated that
the Midgard Loan will be repaid with funds generated by Midgard's
business operations.
Subsidiaries Facility. The Company currently anticipates
that on the Purchaser Maturity Date, up to $175 million of the
Purchaser Loan will be repaid with funds provided
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<PAGE>
to the Company by Maxus Northwest Java, Inc. ("Java") and Maxus
Southeast Sumatra, Inc. ("Sumatra") (collectively, the
"Designated Subsidiaries"). The Company anticipates that the
Designated Subsidiaries will provide these funds from the
proceeds of a loan of up to $175 million (the "Subsidiaries
Loan") made to them pursuant to the Subsidiaries Facility. The
Subsidiaries Loan will be made in a single drawing on the
Purchaser Maturity Date, will mature on December 31, 2002 and
will be repaid in up to 24 consecutive quarterly installments
commencing on March 31, 1997, subject to semi-annual borrowing
base redeterminations. At the option of the Designated
Subsidiaries, the interest rates applicable to the Subsidiaries
Loan will be, until March 31, 1997, either (i) the one-, two- or
three-month London Interbank Offered Rate plus a margin of 21/4%
or (ii) the Base Rate (to be defined in the credit agreement
relating to the Subsidiaries Facility) plus a margin of 11/4%
and, thereafter, either (iii) the one-, two- or three-month
London Interbank Offered Rate plus a margin of 23/4% or (iv) the
Base Rate plus a margin of 13/4%. The Subsidiaries Loan to Java
and Sumatra will be secured by certain of the assets of Java and
Sumatra, will be guaranteed by the Company and a new subsidiary
formed to hold the stock of Java and Sumatra, and the guarantee
by the new holding company will be secured by the stock of Java
and Sumatra. The agreement evidencing the Subsidiaries Loan will
contain a negative pledge on all of the other assets of the
Designated Subsidiaries, subject to customary exceptions.
The lenders' obligation to fund the Subsidiaries Loan will
be subject to certain conditions as described below. It is
anticipated that the Subsidiaries Loan will be repaid with funds
generated by the Designated Subsidiaries' business operations.
Upon further review of the value of the assets of Midgard
and the Designated Subsidiaries, the terms of the Midgard Loan
and the Subsidiaries Loan may be modified to provide for
intercompany guarantees or other arrangements whereby Midgard and
the Designated Subsidiaries provide support for each other's
loans.
Conditions to Funding. The obligation of the lenders to
advance the remaining amount of credit available under the
Purchaser Facility is subject to the fulfillment of certain
conditions, including but not limited to, (i) the absence of any
material adverse change in the condition (financial or
otherwise), business, operations, assets or nature of assets or
liabilities of (a) YPF and its subsidiaries (taken as a whole),
(b) the Purchaser and (c) the Company and its subsidiaries, and
(ii) the lenders' satisfaction that the Company will have
sufficient cash available to pay the lesser of (a) $134 million
or (b) the principal of the Purchaser Loan, interest thereon and
other amounts due on the Purchaser Maturity Date under the
Purchaser Facility.
The obligation of the lenders to fund the Midgard Loan and
the Subsidiaries Loan will be subject to certain additional
conditions, including without limitation, (i) the effectiveness
of the Merger, (ii) the absence of any material adverse change in
the condition (financial or otherwise), business, operations,
assets or nature of assets or liabilities of (a) YPF and its
subsidiaries (taken as a whole), (b) the Company and its
subsidiaries (taken as a whole), (c) in the case of the Midgard
Loan, Midgard and its subsidiaries (taken as a whole) and (d) in
the case of the Subsidiaries Loan, Java or Sumatra or their
holding company, (iii) the payment in full of the Purchaser Loan
and (iv) all indebtedness and other obligations of each of
Midgard, Java and Sumatra to the Company and its other
subsidiaries shall have been paid in full or satisfactorily
subordinated to the repayment of the Midgard Loan and the
Subsidiaries Loan.
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<PAGE>
Prepayment. Each of the Purchaser Loan, the Midgard Loan
and the Subsidiaries Loan (collectively, the "Loans") may be
prepaid in whole or in part without premium or penalty, except
for costs associated with the prepayment of any portion of a Loan
bearing interest at a rate determined by reference to the London
Interbank Offered Rate prior to the end of any applicable
interest period.
YPF Guarantee. YPF has guaranteed the repayment of the
Purchaser Facility and will guarantee the Midgard Facility and
the Subsidiaries Facility. The YPF guarantee of the Purchaser
Facility is secured by a pledge of the capital stock of the
Purchaser. The guarantee contains certain covenants including a
limitation on YPF's debt level and a required level of tangible
net worth.
Certain Fees. YPF has agreed to pay to Chase customary fees
in connection with each of the facilities.
Covenant Regarding Financing. In the Merger Agreement, YPF
and the Purchaser agreed that they will use their reasonable best
efforts to obtain the financings contemplated by the Commitment
Letter.
AVAILABLE INFORMATION
The Company is subject to the information and filing
requirements of the Exchange Act and is required to file periodic
reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission") relating to
its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, options granted to
them, the principal holders of the Company's securities and any
material interest of such persons in transactions with the
Company is required to be described in proxy statements
distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other
information should be available for inspection and copying at the
Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of these
materials may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W. Washington, D.C. 20549. Such
material should also be available for inspection at the library
of the NYSE, 20 Broad Street, New York, New York 10005 and the
Pacific Stock Exchange at 233 South Beaudry Avenue, Los Angeles,
California 90012.
Certain additional information relating to the Offer, the
Merger Agreement, the acquisition by YPF of a controlling equity
interest in the Company and the financing thereof and related
matters are contained in the Purchaser's Offer to Purchase, dated
March 3, 1995, the Schedule 14D-1 and the Solicitation/
Recommendation Statement on Schedule 14D-9 and amendments thereto
filed by the Company with the Commission, copies of which are
available for inspection (and copies of which may be obtained) at
the places and in the manner set forth above (except that such
copies will not be available at the regional offices of the
Commission).
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