<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8567-2
MAXUS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1891531
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 NORTH HARWOOD STREET, DALLAS, TEXAS 75201-6594
(Address of principal executive offices) (Zip Code)
(214) 953-2000
(Registrant's telephone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO THE FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [_]
Shares of Common Stock outstanding at November 7, 1995: 135,609,772
<PAGE>
PART I. FINANCIAL INFORMATION
In the opinion of the management of Maxus Energy Corporation, all adjustments
(consisting only of normal accruals) necessary for a fair presentation of the
consolidated results of operations, consolidated balance sheet and consolidated
cash flows at the date and for the periods indicated have been included in the
accompanying consolidated financial statements. Periods prior to April 1, 1995
are presented; however, financial statements for these periods are on a pre-
Merger basis and, therefore, not comparative.
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have reviewed the accompanying consolidated balance sheet of Maxus Energy
Corporation (a Delaware corporation) as of September 30, 1995, and the related
consolidated statements of income and cash flows for the six-month period then
ended in accordance with standards established by the American Institute of
Certified Public Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to the financial data and
making inquiries of persons responsible for financial and accounting matters.
It is substantially less in scope than an audit in accordance with generally
accepted auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Dallas, Texas
October 24, 1995
3
<PAGE>
MAXUS ENERGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited) (in millions, except per share)
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
1995
----------------------------
Three Months Six Months
Ending Ending
September 30, September 30,
----------------------------
<S> <C> <C>
REVENUES
Sales and operating revenues $141.8 $292.5
Other revenues, net 4.9 11.1
----------------------------
146.7 303.6
----------------------------
COSTS AND EXPENSES
Operating expenses 58.2 116.2
Gas purchase costs 13.6 26.8
Exploration, including exploratory dry holes 10.3 27.1
Depreciation, depletion and amortization 45.5 90.7
General and administrative expenses 4.7 9.1
Taxes other than income taxes 3.5 6.3
Interest and debt expenses 35.5 70.2
----------------------------
171.3 346.4
----------------------------
Loss Before Income Taxes (24.6) (42.8)
Income Taxes 3.5 8.3
----------------------------
Net Loss (28.1) (51.1)
Dividend Requirement on Preferred Stock 9.6 19.2
----------------------------
Net Loss Applicable To Common Shares ($37.7) ($70.3)
============================
Net Loss per Common Share ($0.28) ($0.52)
============================
Average Common Shares
Outstanding (in millions) 135.6 135.6
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
4
<PAGE>
MAXUS ENERGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited) (in millions, except per share)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994
----------------------------
Three Months Nine Months
Ending Ending
September 30, September 30,
----------------------------
<S> <C> <C>
REVENUES
Sales and operating revenues $170.2 $524.8
Other revenues, net (5.5) 7.6
----------------------------
164.7 532.4
----------------------------
COSTS AND EXPENSES
Operating expenses 61.7 183.7
Gas purchase costs 20.8 96.7
Exploration, including exploratory dry holes 7.6 26.1
Depreciation, depletion and amortization 33.0 106.4
General and administrative expenses 5.6 18.2
Taxes other than income taxes 3.7 10.6
Interest and debt expenses 24.9 72.3
Environmental studies and remediation - 11.5
Restructuring:
Gain on sale of assets - (201.9)
Restructuring costs - 100.9
----------------------------
157.3 424.5
----------------------------
Income Before Income Taxes 7.4 107.9
Income Taxes 23.4 105.0
----------------------------
Net Income/(Loss) (16.0) 2.9
Dividend Requirement on Preferred Stock 9.6 34.0
----------------------------
Net Loss Applicable To Common Shares ($25.6) ($31.1)
============================
Net loss per Common Share ($0.19) ($0.23)
============================
Average Common Shares
Outstanding (in millions) 134.9 134.7
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
5
<PAGE>
MAXUS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEET
(in million, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 1, September 30,
1995 1995
-----------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $92.1 $32.6
Short-term investments 65.0 -
Receivables, less doubtful receivables 127.8 123.0
Taxes receivable 13.7 -
Inventories 28.6 37.2
Restricted cash 48.5 27.6
Deferred income taxes 7.6 7.6
Prepaid expenses and other current assets 18.9 19.9
- --------------------------------------------------------------------------------
Total Current Assets 402.2 247.9
Properties and equipment, less accumulated
depreciation and depletion of $0.0, and $90.7 2,404.7 2,383.7
Investments and long-term receivables 36.7 7.3
Restricted cash 77.1 72.7
Deferred charges 15.5 18.9
- --------------------------------------------------------------------------------
Total Assets $2,936.2 $2,730.5
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Long-term debt $12.7 $38.4
Accounts payable 49.8 46.9
Accrued liabilities 263.2 169.7
Taxes payable - 8.9
- --------------------------------------------------------------------------------
Total Current Liabilities 325.7 263.9
Long-term debt 1,282.7 1,252.6
Advance from parent - 1.8
Deferred income taxes 593.5 568.0
Other liabilities and deferred credits 260.9 241.1
$9.75 Redeemable Preferred Stock, $1.00 par value
Authorized and issued shares -1,250,000 125.0 125.0
Stockholders' Equity
$2.50 Preferred stock, $1.00 par value
Authorized shares -5,000,000
Issued shares -3,500,000 73.1 68.7
$4.00 Preferred stock , $1.00 par value
Authorized shares -5,915,017
Issued shares -4,356,958, and 4,356,958 24.8 16.1
Common Stock, $1.00 par value
Authorized shares -300,000,000
Issued shares -135,897,899, and 135,609,772 135.9 135.6
Paid-in capital 118.2 108.8
Accumulated deficit - (51.1)
Common Treasury Stock, at cost -310,535 shares (3.6) -
- --------------------------------------------------------------------------------
Total Stockholders' Equity 348.4 278.1
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $2,936.2 $2,730.5
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited). The Company uses the
successful efforts method to account for its oil and gas producing activites.
6
<PAGE>
MAXUS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEET
(in million, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1994
------------
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $40.6
Short-term investments 103.8
Receivables, less doubtful receivables 152.4
Taxes receivable 23.8
Inventories 27.9
Restricted cash 46.4
Prepaid expenses and other current assets 18.7
- ------------------------------------------------------------------------
Total Current Assets 413.6
Properties and equipment, less accumulated
depreciation and depletion of $1,611.0 1,088.4
Investments and long-term receivables 40.2
Restricted cash 94.2
Intangible assets, less accumulated amortization of $14.2 35.8
Deferred income taxes 9.4
Deferred charges 25.1
- ------------------------------------------------------------------------
Total Assets $1,706.7
========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Long-term debt $4.7
Accounts payable 65.1
Accrued liabilities 101.2
- ------------------------------------------------------------------------
Total Current Liabilities 171.0
Long-term debt 970.9
Deferred income taxes 199.3
Other liabilities and deferred credits 149.4
$9.75 Redeemable Preferred Stock, $1.00 par value
Authorized and issued shares -1,250,000 125.0
Stockholders' Equity
$2.50 Preferred stock, $1.00 par value
Authorized shares -5,000,000
Issued shares -3,500,000 3.5
$4.00 Preferred stock, $1.00 par value
Authorized shares -5,915,017
Issued shares -4,358,958 4.4
Common Stock, $1.00 par value
Authorized shares -300,000,000
Issued shares -135,694,722 135.7
Paid-in capital 988.1
Accumulated deficit (1,016.4)
Minimum pension liability (18.3)
Unrealized gain/(loss) on marketable securities (2.4)
Common Treasury Stock, at cost -295,995 shares (3.5)
- ------------------------------------------------------------------------
Total Stockholders' Equity 91.1
- ------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $1,706.7
========================================================================
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited). The Company uses the
successful efforts method to account for its oil and gas producing activites.
7
<PAGE>
MAXUS ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited) (in millions)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995
-------------
Six Months
Ending
September 30,
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($51.1)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation, depletion and amortization 90.7
Dry hole costs 9.5
Deferred income taxes (25.5)
Gain on sale of assets (4.4)
Postretirement benefits 2.0
Accretion of discount 4.0
Other (0.2)
Changes in components of working capital:
Receivables 5.2
Inventories, prepaids and other current assets (9.4)
Accounts payable (2.9)
Accrued liabilities (24.4)
Taxes payable/receivable 22.6
-------------
Net Cash Provided by Operating Activities 16.1
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for properties and equipment--including
dry hole costs (79.2)
Proceeds from sale of assets 0.5
Proceeds from sale/maturity of short-term investments 96.3
Restricted cash 25.4
Other (21.7)
-------------
Net Cash Provided by Investing Activitiies 21.3
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Interest rate swap 6.9
Proceeds from issuance of short-term debt 17.2
Repayment of short-term debt (17.7)
Net proceeds from issuance of long-term debt 833.9
Repayment of long-term debt (425.1)
Acquisition of common stock, including merger costs (745.2)
Capital contribution from parent 250.5
Cash advance from parent 1.8
Dividends paid (19.2)
-------------
Net Cash Used in Financing Activities (96.9)
- -------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (59.5)
Cash and Cash Equivalents at Beginning of Period 92.1
- -------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $32.6
===============================================================================
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
8
<PAGE>
MAXUS ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited) (in millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994
-------------
Nine Months
Ending
September 30,
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 106.4
Dry hole costs 1.1
Deferred income taxes 28.7
Gain on sale of assets (166.5)
Restructuring costs 91.0
Postretirement benefits 4.9
Other 20.8
Changes in components of working capital:
Receivables 23.4
Inventories, prepaids and other current assets (3.2)
Accounts payable (45.8)
Accrued liabilities (10.4)
Taxes payable 3.0
-------------
Net Cash Provided by Operating Activities 56.3
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for properties and equipment--including
dry hole costs (132.7)
Expenditures for investments (20.1)
Proceeds from sale of assets 376.1
Proceeds from sale/maturity of short-term investments 4.2
Purchases of short-term investments (89.5)
Restricted cash 40.8
Other (5.8)
-------------
Net Cash Provided by Investing Activities 173.0
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Interest rate swap (5.9)
Net borrowings from joint venture partners (4.4)
Proceeds from issuance of short-term debt 30.0
Repayment of short-term debt (59.4)
Net proceeds from issuance of long-term debt 101.3
Repayment of long-term debt (130.4)
Redemption of preferred stock (125.0)
Dividends paid (34.0)
-------------
Net Cash Used in Financing Activities (227.8)
- --------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 1.5
Cash and Cash Equivalents at Beginning of Period 128.7
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $130.2
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
9
<PAGE>
1. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared in conformity with
generally accepted accounting principles, the most significant of which are
described below. The financial statements reflect the effects of the Merger-
related transactions in the second quarter of 1995. Periods prior to April
1, 1995 are presented; however, financial statements for these periods are
on a pre-Merger basis and, therefore, not comparative.
A) CONSOLIDATION AND EQUITY ACCOUNTING
The Consolidated Financial Statements include the accounts of Maxus
Energy Corporation and all domestic and foreign subsidiaries (the
"Company" or "Maxus"). All significant intercompany accounts and
transactions have been eliminated.
B) STATEMENT OF CASH FLOWS
Investments with original maturities of three months or less at the time
of acquisition are considered cash equivalents for purposes of the
accompanying Consolidated Statement of Cash Flows. Short-term
investments include U. S. Treasury Notes and investments with maturities
over three months but less than one year.
C) INVENTORY VALUATION
Inventories are valued at the lower of cost or market, cost being
determined primarily by the weighted average cost method.
D) PROPERTIES AND EQUIPMENT
Properties and equipment are carried at cost. Major additions are
capitalized; expenditures for repairs and maintenance are charged
against earnings.
The Company uses the successful efforts method to account for costs
incurred in the acquisition, exploration, development and production of
oil and gas reserves. Under this method, all geological and geophysical
costs are expensed; all development costs, whether or not successful,
are capitalized as costs of proved properties; exploratory drilling
costs are initially capitalized, but if the effort is determined to be
unsuccessful, the costs are then charged against earnings; depletion is
computed based on an aggregation of properties with common geologic
structural features or stratigraphic conditions, such as reservoirs or
fields.
For U. S. unproved properties, a valuation allowance (included as an
element of depletion) is provided by a charge against earnings to
reflect the impairment of unproven acreage. International non-producing
leasehold costs are reviewed periodically by management to insure the
carrying value is recoverable based upon the geological and engineering
estimates of total possible and probable reserves expected to be added
over the remaining life of each concession. Based upon increases to
proved reserves determined by reserve reports a portion of the costs
will be periodically transferred to investment in proved properties.
Effective April 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS 121 requires a review of long-lived assets for impairment
whenever events or changes in circumstance indicate that the carrying
amount of the asset may not be recoverable. If the expected future net
cash flows of the long-lived assets is less than the carrying amount of
the asset an impairment loss shall be recognized to value the asset at
its fair value. Upon merger with a subsidiary of YPF, the Company
reviewed the valuation of its oil and gas properties to assure their
carrying values did not exceed their fair market values.
Depreciation and depletion related to the costs of all development
drilling, successful exploratory drilling and related production
equipment is calculated using the unit of production ("UOP")
10
<PAGE>
method based upon estimated proved developed reserves. Leasehold costs
are amortized using the UOP method based on estimated proved reserves.
Other properties and equipment are depreciated generally on the
straight-line method over their estimated useful lives. Estimated future
dismantlement, restoration and abandonment costs for major facilities,
net of salvage value, are taken into account in determining
depreciation, depletion and amortization.
The Company capitalizes the interest cost associated with major property
additions and mineral development projects while in progress, such
amounts being amortized over the useful lives and applying the same
depreciation method, as that used for the related assets.
When complete units of depreciable property are retired or sold, the
asset cost and related accumulated depreciation are eliminated with any
gain or loss reflected in income. When less than complete units of
depreciable property are disposed of or retired, the difference between
asset cost and salvage or sales value is charged or credited to
accumulated depreciation and depletion.
E) DEFERRED CHARGES
Deferred charges are primarily comprised of debt issuance costs and are
amortized over the terms of the related debt agreements.
F) REVENUE RECOGNITION
Oil and gas sales are recorded on the entitlements method. Differences
between the Company's actual production and its entitlements result in a
receivable when underproduction occurs and a payable when overproduction
occurs. These underproduced or overproduced volumes are valued based on
the weighted average sales price for each respective property.
G) PENSIONS
The Company has a number of trusteed noncontributory pension plans
covering substantially all full-time employees. The Company's funding
policy is to contribute amounts to the plans sufficient to meet the
minimum funding requirements under governmental regulations, plus such
additional amounts as management may determine to be appropriate. The
benefits related to the plans are based on years of service and
compensation earned during years of employment. The Company also has a
noncontributory supplemental retirement plan for executive officers. The
Company has fully accrued its accumulated pension obligation.
H) OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company provides certain health care and life insurance benefits for
retired employees and certain insurance and other postemployment
benefits for individuals whose employment is terminated by the Company
prior to their normal retirement. The Company accrues the estimated cost
of retiree benefit payments, other than pensions, during employees'
active service period. Employees become eligible for these benefits if
they meet minimum age and service requirements. The Company accounts for
benefits provided after employment but before retirement by accruing the
estimated cost of postemployment benefits when the minimum service
period is met, payment of the benefit is probable and the amount of the
benefit can be reasonably estimated. The Company has fully accrued its
accumulated postretirement and postemployment benefits obligation.
I) ENVIRONMENTAL EXPENDITURES
Environmental liabilities are recorded when environmental assessments
and/or remediation are probable and material and such costs to the
Company can be reasonably estimated.
11
<PAGE>
J) LITIGATION CONTINGENCIES
The Company records liabilities for litigation when such amounts are
probable and material and can be reasonably estimated.
K) INCOME TAXES
The Company reports income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for
Income Taxes." SFAS 109 requires the use of an asset and liability
approach to measure deferred tax assets and liabilities resulting from
all expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns.
L) EARNINGS PER SHARE
Primary earnings per share are based on the weighted average number of
shares of common stock and common stock equivalents outstanding, unless
the inclusion of common stock equivalents has an antidilutive effect on
earnings per share. Fully diluted earnings per share are not presented
for the three months or six months ended September 30, 1995 due to the
antidilutive effect of including all potentially dilutive common stock
equivalents.
M) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash equivalents, short-term
investments and trade receivables.
The Company's cash equivalents and short-term investments and restricted
cash represent high-quality securities placed with various high
investment grade institutions. This investment practice limits the
Company's exposure to concentrations of credit risk.
The Company's trade receivables are dispersed among a broad domestic and
international customer base; therefore, concentrations of credit risk
are limited. The Company carefully assesses the financial strength of
its customers. Letters of credit are the primary security obtained to
support lines of credit.
The Company has minimal exposure to credit losses in the event of
nonperformance by the counterparties to natural gas price swap
agreements and nonderivative financial assets. The Company does not
obtain collateral or other security to support financial instruments
subject to credit risk but restricts such arrangements to investment-
grade counterparties.
N) INVESTMENTS IN MARKETABLE SECURITIES
All investments in debt securities and certain investments in equity
securities are reported at fair value except for those investments which
management has the intent and the ability to hold to maturity.
Investments which are held-for-sale are classified based on the stated
maturity and management's intent to sell the securities. Unrealized
gains and losses on investments in marketable securities are reported as
a separate component of stockholders' equity.
O) DERIVATIVES
The Company periodically hedges the effects of fluctuations in the price
of natural gas through price swap agreements and futures contracts. The
Company typically hedges no more than 50% of its U. S. gas production.
Gains and losses on these hedges are deferred until the related sales
are recognized and are recorded as a component of sales and operating
revenues. The Company periodically enters into interest rate swap
agreements to hedge interest on long-term debt. The gain or loss on
interest rate swaps is recognized monthly as an increase or decrease to
interest expense.
12
<PAGE>
P) TAKE-OR-PAY OBLIGATIONS
The Company records payments received for take-or-pay obligations for
unpurchased contract volumes as deferred revenue, which is included in
Other Liabilities in the consolidated balance sheet. The deferred
revenue is recognized in the income statement as quantities are
purchased which fulfill the take-or-pay obligation.
2. MERGER
On June 8, 1995, a special meeting of the stockholders of the Company was
held to approve the Agreement of Merger ("Merger Agreement") dated
February 28, 1995, between the Company, YPF Acquisition Corp. (the
"Purchaser") and YPF Sociedad Anonima ("YPF"). The holders of the Company's
common stock, $1.00 par value per share (the "Shares"), and $4.00 Cumulative
Convertible Preferred Stock (the "$4.00 Preferred Stock" and together with
the Shares, the "Voting Shares") approved the Merger Agreement, and the
Purchaser was merged into the Company (the "Merger") on June 8, 1995 (the
"Merger Date").
The Merger was the consummation of the transactions contemplated by a tender
offer (the "Offer") which was commenced on March 6, 1995 by the Purchaser
for all the outstanding Shares at $5.50 per Share. Pursuant to the Offer, in
April 1995 the Purchaser acquired 120,000,613 Shares representing
approximately 88.5% of the then-outstanding Shares of the Company. As a
result of the Merger, each outstanding Share (other than Shares held by the
Purchaser, YPF or any of their subsidiaries or in the treasury of the
Company, all of which were cancelled in the second quarter of 1995, and
Shares of holders who perfected their appraisal rights under Section 262 of
the Delaware General Corporation Law) was converted into the right to
receive $5.50, and YPF became the sole holder of the Shares. Under the terms
of the Merger Agreement, all of the Company's preferred stock, consisting of
the $4.00 Preferred Stock, $2.50 Cumulative Preferred Stock and $9.75
Cumulative Convertible Preferred Stock, remain outstanding. YPF currently
owns approximately 96.9% of the outstanding Voting Shares.
The total amount of funds required by the Purchaser to acquire the entire
common equity interest in the Company, including the purchase of Shares
pursuant to the Offer and the payment for Shares converted into the right to
receive cash pursuant to the Merger, was approximately $762 million. In
addition, the Purchaser assumed all outstanding obligations of the Company.
On April 5,1995, the Purchaser entered into a credit agreement (the "Credit
Agreement") with lenders for which The Chase Manhattan Bank (National
Association) ("Chase") acted as agent, pursuant to which the lenders
extended to the Purchaser a credit facility for up to $550 million (the
"Purchaser Facility"). On April 5, 1995, the Purchaser borrowed $442 million
under the Purchaser Facility and received a capital contribution of $250
million from YPF. The Purchaser used borrowings under the Purchaser Facility
and the funds contributed to it by YPF to purchase 120,000,613 Shares
pursuant to the Offer.
During the second quarter of 1995, the Company used the purchase method to
record the acquisition of the Company by YPF. In a purchase method
combination, the purchase price is allocated to the assets acquired and
liabilities assumed based on their fair values at the date of acquisition.
As a result, the assets and liabilities of the Company were revalued to
reflect the approximate $762 million cash purchase price paid by YPF plus
all liabilities assumed by YPF to acquire the Company. The Company's oil and
gas properties were assigned carrying amounts based on their relative fair
market values. In connection with the purchase price allocation, the Company
adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires a review of long-lived assets for
impairment whenever events or changes in circumstance indicate that the
carrying amount of the asset may not be recoverable. Under SFAS 121, if the
expected future cash flows of the long-lived assets is less than the
carrying amount of the asset an impairment loss shall be recognized to value
the asset at its fair value. Maxus revalued its assets and liabilities in
the purchase price allocation; however, there was no impact on the financial
statements in 1995 resulting from the adoption of SFAS 121.
13
<PAGE>
Pursuant to a commitment letter from Chase, Chase provided two additional
credit facilities aggregating $425 million: (i) a credit facility of $250
million extended to Midgard Energy Company ("Midgard"), a wholly owned
subsidiary of the Company, and (ii) a credit facility of $175 million
extended to Maxus Indonesia, Inc. ("Holdings"), a wholly owned subsidiary of
the Company. The proceeds of the loans made pursuant to these facilities
were used to repay, in part, the Purchaser Facility, which was assumed by
the Company. In addition, the Company applied $8 million of its available
cash to repay the Purchaser Facility and is using approximately $86 million
of its available cash to pay holders of Shares converted into the right to
receive cash in the Merger.
A) MIDGARD FACILITY
Approximately $250 million of the loans under the Purchaser Facility
were repaid on June 8, 1995 with funds provided to the Company by
Midgard. Midgard provided these funds from the proceeds of a $250
million loan (the "Midgard Loan") extended to it pursuant to a credit
agreement (the "Midgard Facility") entered into on such date. In
addition, approximately $8 million of the loans outstanding under the
Purchaser Facility, including accrued interest on the Purchaser Facility
loans, were repaid on June 8, 1995 utilizing cash held by the Company.
The Midgard Loan, which was made in a single drawing, will mature on
December 31, 2003 and will be repaid in up to 28 consecutive equal
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 ("LIBOR") plus a margin of 1 3/4% or (ii) the Base Rate (as defined
in the Midgard Facility) plus a margin of 3/4% and, thereafter, either
(iii) the one-, two- or three-month LIBOR plus a margin of 2 1/4% or
(iv) the Base Rate plus a margin of 1 1/4%. At September 30, 1995, the
interest rate on the Midgard facility based on the two-month LIBOR plus
1 3/4% was 7.625%. The Midgard Loan is not secured but is guaranteed by
YPF and the Company. The agreement evidencing the Midgard Loan contains,
among other things, a negative pledge on all assets of Midgard, subject
to customary exceptions. It is anticipated that the Midgard Loan will be
repaid with funds generated by Midgard's business operations.
B) SUBSIDIARIES FACILITY
Approximately $175 million of the Purchaser Facility was repaid with
funds provided on June 16, 1995 to the Company by Holdings. Holdings
provided these funds from the proceeds of a $175 million loan (the
"Subsidiaries Loan") extended to it pursuant to a credit agreement (the
"Subsidiaries Facility") entered into on such date.
The Subsidiaries Loan, which was made in a single drawing on June 16,
1995, will mature on December 31, 2002 and will be repaid in up to 24
consecutive equal quarterly installments commencing on March 31, 1997,
subject to semi-annual borrowing base redeterminations. At the option of
Holdings, the interest rates applicable to the Subsidiaries Loan will
be, until March 31, 1997, either (i) the one-, two- or three-month LIBOR
plus a margin of 2 1/4% or (ii) the Base Rate (as defined in the
Subsidiaries Facility) plus a margin of 1 1/4% and, thereafter, either
(iii) the one-, two- or three-month LIBOR plus a margin of 2 3/4% or
(iv) the Base Rate plus a margin of 1 3/4%. At September 30, 1995, the
interest rate on the subsidiaries facility based on the two-month LIBOR
plus 2 1/4% was 8.0625%. The Subsidiaries Loan to Holdings is secured by
the stock of Maxus Northwest Java, Inc. ("Java") and Maxus Southeast
Sumatra, Inc. ("Sumatra") (collectively, the "Holdings Subsidiaries")
and by the interest of Holdings, Java and Sumatra in certain accounts
maintained at Chase into which the proceeds of sales of hydrocarbons are
to be deposited, and is guaranteed by Java, Sumatra, YPF and the
Company. The agreement evidencing the Subsidiaries Loan contains a
negative pledge on all of the other assets of Holdings, subject to
customary exceptions. It is anticipated that the Subsidiaries Loan will
be repaid with funds generated by the Holdings Subsidiaries' business
operations.
Each of the Midgard Facility contains restrictive covenants including
limitations upon the sale of assets, mergers and consolidations, the
creation of liens and additional indebtedness, investments, dividends,
the purchase or repayment of
14
<PAGE>
subordinated indebtedness, transactions with affiliates and
modifications to certain material contracts. The obligors unde the
Midgard Facility may not permit (a) consolidated tangible net worth to
be less than $200 million, in the case of the Midgard Credit Facility,
or $350 million, in the case of the Subsidiaries Credit Facility, plus
(or minus), in the case of Midgard, the amount of any adjustment to net
worth, resulting from the merger of YPF Acquisition Corp. into the
Company, (b) the ratio of consolidated cash flow to consolidated debt
service to be less than 1.1 to 1.0 at the end of any fiscal quarter and
(c) the ratio of consolidated cash flow to consolidated interest expense
to be less than 1.25 to 1.0 at the end of any fiscal quarter. In
addition, mandatory prepayments of the loans under the Midgard Credit
Facility and the Subsidiaries Credit Facility may be required in
connection with certain asset sales and casualty losses, upon the
issuance of subordinated indebtedness and in 1996 and in each year
thereafter, if, after semi-annual review, the agent and the lenders
determine that a borrowing base deficiency exists.
The guaranty by Maxus of the obligation under the Midgard Credit
Facility (the "Midgard Guaranty") and under the Subsidiaries Credit
Facility (the "Subsidiaries Guaranty") contains restrictions upon
mergers and consolidations, the creation of liens and the business
activities in which Maxus and its subsidiaries may engage. In addition,
Midgard, in the case of the Midgard Guaranty, and Holdings and its
subsidiaries, in the case of the Subsidiaries Guaranty, are required to
be wholly owned subsidiaries of Maxus, except to the extent YPF or a
subsidiary of YPF (other than Maxus or a subsidiary of Maxus) makes
capital contributions to Midgard or Holdings or one of Holdings
subsidiaries, as the case may be.
C) KEEPWELL COVENANT
Pursuant to the Merger Agreement, in the event that the Company is
unable to meet its obligations as they come due, whether at maturity or
otherwise, including, solely for the purposes of this undertaking,
dividend and redemption payments with respect to the Preferred Stock,
YPF has agreed to capitalize the Company in an amount necessary to
permit the Company to meet such obligations; provided that YPF's
aggregate obligation will be: (i) limited to the amount of debt service
obligations under the Midgard Facility and/or the Subsidiaries Facility
and (ii) reduced by the amount, if any, of capital contributions by YPF
to the Company after the Merger Date and by the amount of the net
proceeds of any sale by the Company of common stock or non-redeemable
preferred stock after the Merger Date. The foregoing obligations of YPF
(the "Keepwell Covenant") will survive until the ninth anniversary of
the Merger Date. In addition, on March 7, 1995, YPF announced that its
board of directors authorized YPF to guarantee the Company's outstanding
long-term debt as of the Merger Date, the principal amount of which is
approximately $977 million. The long-term debt covered by the YPF
guarantee is the Company's outstanding 11 1/4%, 11 1/2% and 8 1/2%
Sinking Fund Debentures, its outstanding 9 7/8%, 9 1/2% and 9 3/8%
Notes, and its outstanding medium-term notes. YPF has also guaranteed
the payment and performance of the Company's obligations to the holders
of its $9.75 Preferred Stock. It is anticipated that YPF will begin to
make capital contributions to the Company in the fourth quarter of 1995
to help fund a portion of its exploration and development budget. Such
contributions will be credited to YPF's obligations under the Keepwell
Covenant.
15
<PAGE>
3. ANALYSIS OF THE MAIN ACCOUNTS OF THE CONSOLIDATED FINANCIAL STATEMENTS
Details regarding the significant accounts included in the accompanying
financial statements are as follows:
Consolidated Balance Sheet Accounts Sept. 30, 1995
--------------
ASSETS
A) RECEIVABLES:
Trade accounts receivables $70.0
Joint interest billings 14.1
IVA receivable 6.2
Crude trading receivables 14.2
Insurance receivables 6.8
Other 12.7
Allowance for doubtful trade receivables (1.0)
------
$123.0
======
B) PROPERTIES AND EQUIPMENT:
Proved properties $1,588.9
Unproved properties 740.0
Other 130.7
--------
Total Oil and Gas 2,459.6
Corporate 14.8
--------
2,474.4
Less--Accumulated depreciation, depletion and
amortization 90.7
--------
$2,383.7
========
C) INVENTORIES:
Crude oil $ 7.5
Warehouse/field yard inventory 29.1
Other 0.6
-----
$37.2
=====
D) DEFERRED CHARGES:
Unamortized debt issuance costs $16.1
Other 2.8
-----
$18.9
=====
LIABILITIES
E) ACCRUED LIABILITIES:
Environmental remediation $22.8
Accrued interest 37.7
Overlift liability 15.6
Merger accrual 30.0
Other 63.6
------
$169.7
======
16
<PAGE>
Interest
--------
F) LONG-TERM DEBT: Rates Maturity Current Noncurrent
------------ ---------- -------- ----------
8.5% Debentures 8.50 1997-2008 $ 75.7
9.375% Notes 9.37 2003 224.9
9.5% Notes 9.50 2003 87.0
9.875% Notes 9.87 2002 220.5
11.25% Debentures 11.25 2013 14.4
11.5% Debentures 11.50 2001-2015 94.5
Medium-term notes 7.57-11.08 1995-2004 $38.3 110.5
Maxus Indonesia
credit agreement 8.3125 1997-2002 175.0
Maxus Midgard
credit agreement 7.8125 1997-2003 250.0
Other 0.1 0.1
----- --------
$38.4 $1,252.6
===== ========
G) OTHER LIABILITIES AND DEFERRED CREDITS:
Environmental remediation $90.8
Long-term employee benefit costs 59.3
Litigation contingencies 10.0
Reserve for insurance losses 23.4
Other 57.6
------
$241.1
======
4. TAXES
The Company reports income taxes in accordance with SFAS 109. The Company's
provision for income taxes was comprised of the following:
Six Months Ended
September 30, 1995
----------------------
Current
Foreign................................................ $ 33.6
State and local........................................ .2
------
33.8
Deferred
Federal................................................ (12.1)
Foreign................................................ (13.4)
------
(25.5)
------
Provision for income taxes............................... $ 8.3
======
5. RESTRICTED CASH
At September 30, 1995, the Company had $100.3 million in restricted cash of
which $51.4 million represented collateral for outstanding letters of credit
and $7.4 million represented six months of interest on outstanding
borrowings as required by the Midgard and Subsidiaries credit agreements.
Assets held in trust as required by certain insurance policies totaled $41.5
million. Approximately $27.6 million of collateral for outstanding letters
of credit at September 30, 1995, which will be released within twelve
months, was classified as a current asset.
17
<PAGE>
6. PREFERRED STOCK
The Company has the authority to issue 100,000,000 shares of Preferred
Stock, $1.00 par value. The rights and preferences of shares of authorized
but unissued Preferred Stock are established by the Company's Board of
Directors at the time of issuance.
A) $9.75 CUMULATIVE CONVERTIBLE PREFERRED STOCK
In 1987, the Company sold 3,000,000 shares of $9.75 Cumulative
Convertible Preferred Stock(the "$9.75 Preferred Stock"). Since such
time, the Company has entered into various agreements, most recently on
June 8, 1995, with the sole holder of the $9.75 Preferred Stock pursuant
to which, among other things, the Company has repurchased 500,000 shares
and the parties have waived or amended various covenants, agreements and
restrictions relating to such stock. Currently, 1,250,000 shares of
$9.75 Preferred Stock are outstanding, each receiving an annual cash
dividend of $9.75. In addition, 375,000 of such shares (the "Conversion
Waiver Shares") each receive an additional quarterly cash payment of
$.25 ($.50 in certain circumstances). For the 12-month period commencing
February 1, 1995, each share of the $9.75 Preferred Stock has a
liquidation value of $101.0836 ($126.4 million in the aggregate) which
reduces to $100 at February 1, 1996, in each case plus accrued
dividends. Since February 1, 1994, the stock has been subject to
mandatory redemption at the rate of 625,000 shares per year. The $9.75
Preferred Stock currently is neither convertible by the holder nor
redeemable at the Company's option and has no associated registration
rights. The $9.75 Preferred Stock entitles the holder to vote only on
certain matters separately affecting such holder, and the $9.75
Preferred Stock other than the Conversion Waiver Shares entitles the
holder to elect one individual to the Board of Directors of the Company.
In addition, pursuant to the June 8, 1995 agreement, the holder of the
$9.75 Preferred Stock waived previously granted rights to approve
certain "self-dealing" transactions and certain financial covenants
pertaining to the Company, and the Company waived its right of first
offer with respect to the transfer of the $9.75 Preferred Stock and
certain transfer restrictions on such stock.
B) $4.00 CUMULATIVE CONVERTIBLE PREFERRED STOCK
Each outstanding share of $4.00 Cumulative Convertible Preferred Stock
(the "$4.00 Preferred Stock") is entitled to one vote, is convertible at
any time into shares of the Company's Common Stock (2.29751 shares at
December 31, 1994), shall receive annual cash dividends of $4.00 per
share, is callable at and has a liquidation value of $50.00 per share
($217.9 million in the aggregate at September 30, 1995) plus accrued but
unpaid dividends, if any.
C) $2.50 CUMULATIVE PREFERRED STOCK
Each outstanding share of the $2.50 Preferred Stock shall receive annual
cash dividends of $2.50 per share, is callable after December 1, 1998 at
and has a liquidation value of $25.00 per share ($87.5 million in the
aggregate at September 30, 1995), plus accrued but unpaid dividends, if
any.
The holders of the shares are entitled to limited voting rights under
certain conditions. In the event the Company is in arrears in the
payment of six quarterly dividends, the holders of the $2.50 Preferred
Stock have the right to elect two members to the Board of Directors
until such time as the dividends in arrears are current and a provision
is made for the current dividends due.
7. COMMITMENT AND CONTINGENCIES
Like other energy companies, Maxus' operations are subject to various laws
related to the handling and disposal of hazardous substances which require
the cleanup of deposits and spills. In addition, Maxus is implementing
certain environmental projects related to its former chemicals business
("Chemicals"), sold to Occidental Petroleum Corporation ("Occidental") in
1986 and certain other disposed of businesses.
18
<PAGE>
Maxus has agreed to remediate the site of the former agricultural chemical
plant in Newark, New Jersey, as required by a consent decree entered into in
1990 by Occidental, the United States Environmental Protection Agency (the
"EPA") and the New Jersey Department of Environmental Protection and Energy
(the "DEP"). Pursuant to an agreement with the EPA, Maxus is conducting
further testing and studies to characterize contaminated sediment in a
portion of the Passaic River near the plant site. Maxus has been conducting
similar studies under its own auspices for several years.
Under an Administrative Consent Order issued by the DEP in 1990 covering
sites in Kearny and Secaucus, New Jersey, Maxus will continue to implement
interim remedial measures and to perform remedial investigations and
feasibility studies and, if necessary, will implement additional remedial
actions at various locations where chromite ore residue, allegedly from the
former Kearny plant, was utilized, as well as at the plant site.
Until 1976, Chemicals operated manufacturing facilities in Painesville,
Ohio. Maxus, on behalf of Occidental, has heretofore conducted many
remedial, maintenance and monitoring activities at this site. On
September 27, 1995, the Ohio Environmental Protection Agency (the "OEPA")
issued its Director's Final Findings and Order (the "Director's Order") by
consent ordering that a remedial investigation and feasibility study (the
"RIFS") be conducted at the former Painesville plant area. Maxus has agreed
to participate in the RIFS as required by the Director's Order. It is
estimated that the total cost of performing the RIFS will be $3 million to
$5 million over the next three years. The former Painesville plant area has
been proposed for listing on the national priority list of Superfund sites
as designated by the EPA; however, the EPA has stated that the site will not
be listed so long as it is satisfactorily addressed pursuant to the
Director's Order and OEPA's programs. The scope and nature of further
investigation or remediation which may be required cannot be determined at
this time.
Maxus also has responsibility for Chemicals' share of the remediation cost
for a number of other non-plant sites where wastes from plant operations by
Chemicals were allegedly disposed of or have come to be located, including
several commercial waste disposal sites.
At the time of the spin-off by Maxus of Diamond Shamrock, Inc. ("DSI") in
1987, the Company executed a cost-sharing agreement for the partial
reimbursement by DSI of environmental expenses related to the Company's
disposed of businesses, including Chemicals. DSI is expected to reach its
total reimbursement obligation in 1996.
The Company's total expenditures for environmental compliance for disposed
of businesses, including Chemicals, were $17 million in the second and third
quarters of 1995, $6 million of which was recovered from DSI under the cost-
sharing agreement. Those expenditures are projected to be approximately $5
million in the fourth quarter of 1995 after recovery from DSI.
Reserves, net of cost-sharing by DSI, have been established for
environmental liabilities where they are material and probable and can be
reasonably estimated. At April 1, 1995, reserves for the above environmental
contingencies totaled $124.7 million. At September 30, 1995, the reserve
balance was $113.6 million.
The Company has entered into various operating agreements and capital
commitments associated with the exploration and development of its oil and
gas properties. Such contractual financial and/or performance commitments
are not material.
The Company's foreign petroleum exploration, development and production
activities are subject to political and economic uncertainties,
expropriation of property and cancellation or modification of contract
rights, foreign exchange restrictions and other risks arising out of foreign
governmental sovereignty over the areas in which the Company's operations
are conducted, as well as risks of loss in some countries due to civil
strife, acts of war, guerrilla activities and insurrection. Areas in which
the Company has significant operations include the United States, Indonesia,
Ecuador, Bolivia and Venezuela.
19
<PAGE>
MAXUS ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRD QUARTER 1995
MERGER
On June 8, 1995, a special meeting of the stockholders of Maxus Energy
Corporation (the "Company" or "Maxus") was held to approve the Agreement of
Merger ("Merger Agreement") dated February 28, 1995, between the Company, YPF
Acquisition Corp. (the "Purchaser") and YPF Sociedad Anonima ("YPF"). The
holders of the Company's common stock, $1.00 par value per share (the "Shares"),
and $4.00 Cumulative Convertible Preferred Stock (the "$4.00 Preferred Stock"
and together with the Shares, the "Voting Shares") approved the Merger
Agreement, and the Purchaser was merged into the Company (the "Merger") on June
8, 1995 (the "Merger Date").
The Merger was the consummation of the transactions contemplated by a tender
offer (the "Offer") which was commenced on March 6, 1995 by the Purchaser for
all the outstanding Shares at $5.50 per Share. Pursuant to the Offer, in April
1995 the Purchaser acquired 120,000,613 Shares representing approximately 88.5%
of the then-outstanding Shares of the Company. As a result of the Merger, each
outstanding Share (other than Shares held by the Purchaser, YPF or any of their
subsidiaries or in the treasury of the Company, all of which were cancelled in
the second quarter of 1995, and Shares of holders who perfected their appraisal
rights under Section 262 of the Delaware General Corporation Law) was converted
into the right to receive $5.50, and YPF became the sole holder of the Shares.
Under the terms of the Merger Agreement, all of the Company's preferred stock,
consisting of the $4.00 Preferred Stock, $2.50 Cumulative Preferred Stock and
$9.75 Cumulative Convertible Preferred Stock, remain outstanding. YPF currently
owns approximately 96.9% of the outstanding Voting Shares.
The total amount of funds required by the Purchaser to acquire the entire common
equity interest in the Company, including the purchase of Shares pursuant to the
Offer and the payment for Shares converted into the right to receive cash
pursuant to the Merger, was approximately $762 million. In addition, the
Purchaser assumed all outstanding obligations of the Company. On April 5, 1995,
the Purchaser entered into a credit agreement (the "Credit Agreement") with
lenders for which The Chase Manhattan Bank (National Association) ("Chase")
acted as agent, pursuant to which the lenders extended to the Purchaser a credit
facility for up to $550 million (the "Purchaser Facility"). On April 5, 1995,
the Purchaser borrowed $442 million under the Purchaser Facility and received a
capital contribution of $250 million from YPF. The Purchaser used borrowings
under the Purchaser Facility and the funds contributed to it by YPF to purchase
120,000,613 Shares pursuant to the Offer.
During the second quarter of 1995, the Company used the purchase method to
record the acquisition of the Company by YPF. In a purchase method combination,
the purchase price is allocated to the assets acquired and liabilities assumed
based on their fair values at the date of acquisition. As a result, the assets
and liabilities of the Company were revalued to reflect the approximate $762
million cash purchase price paid by YPF plus all liabilities assumed by YPF to
acquire the Company. The Company's oil and gas properties were assigned carrying
amounts based on their relative fair market values. In connection with the
purchase price allocation, the Company adopted Statement of Financial Accounting
Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," which requires a review of
long-lived assets for impairment whenever events or changes in circumstance
indicate that the carrying amount of the asset may not be recoverable. Under
SFAS 121, if the expected future cash flows of the long-lived assets is less
than the carrying amount of the asset an impairment loss shall be recognized to
value the asset at its fair value. Maxus revalued its assets and liabilities in
the purchase price allocation; however, there was no impact on the financial
statements in 1995 resulting from the adoption of SFAS 121.
Pursuant to a commitment letter from Chase, Chase provided two additional credit
facilities aggregating $425 million: (i) a credit facility of $250 million
extended to Midgard Energy Company ("Midgard"), a wholly owned subsidiary of the
Company, and (ii) a credit facility of $175 million extended to Maxus Indonesia,
Inc. ("Holdings"), a wholly owned subsidiary of the Company. The proceeds of
the loans made pursuant to these facilities were used to repay, in part, the
Purchaser Facility, which was assumed by the Company. In addition, the Company
applied $8 million of its available cash to repayment of the Purchaser Facility
and is using
20
<PAGE>
approximately $86 million of its available cash to pay holders of Shares
converted into the right to receive cash in the Merger.
The financial statements reflect the effects of Merger-related transactions in
the second quarter of 1995. Periods prior to April 1, 1995 are presented;
however, financial statements for these periods are on a pre-Merger basis and,
therefore, not comparative.
RESULTS OF OPERATIONS - 1995
The following table presents the post-merger second and third quarter operating
results:
<TABLE>
<CAPTION>
SECOND THIRD
QUARTER QUARTER
AMOUNTS IN MILLIONS EXCEPT WHERE NOTED 1995 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Net Worldwide Crude Oil Sales (mbpd) 61 60
Average Worldwide Crude Oil Price (per bbl) $17.35 $15.69
U.S. Natural Gas Sales (mmcfpd) 170 172
Average U.S. Gas Price (per mcf) $ 1.43 $ 1.40
Northwest Java Gas Sales (mmcfpd) 57 58
Average Northwest Java Gas Price (per mcf) $ 2.59 $ 2.62
U.S. Natural Gas Liquids (mbpd) 16 18
Average U.S. Natural Gas Liquids Price (per bbl) $10.61 $10.14
Sales Revenues $ 151 $ 142
Costs and Expenses 175 171
Net Loss (23) (28)
Net Loss after Preferred Dividends (33) (38)
Net Loss per Common Share (.24) (.28)
</TABLE>
GUIDE TO TABLE ABBREVIATIONS
----------------------------
mbpd-thousand barrels per day
bbl-barrel
mmcfpd-million cubic feet per day
mcf- thousand cubic feet
The Company reported a net loss of $28 million for the third quarter of 1995 or,
after preferred dividends, a loss of 28 cents per Share compared to a second
quarter loss of $23 million or, after dividends, a loss of 24 cents per Share.
Sales and Operating Revenues. Sales and operating revenues for the third
quarter of 1995 were $142 million, compared to $151 million in the prior
quarter. The lower revenues were primarily attributable to lower worldwide
crude oil prices.
While net worldwide crude oil production and U.S. gas sales were essentially
flat quarter to quarter, average crude oil prices fell from $17.35 in the second
quarter to $15.69 per barrel in the third quarter and the average gas price
declined from $1.43 in the second quarter to $1.40 per mcf in the third quarter.
Northwest Java gas volumes were basically flat quarter to quarter; however, gas
realizations slightly increased over the quarter from $2.59 per mcf to $2.62 per
mcf.
Natural gas liquids sales in the United States were basically even quarter to
quarter. The average sales price for U.S. natural gas liquids in the third
quarter was $10.14 per barrel, a decrease of $.47 per barrel from the second
quarter.
21
<PAGE>
Cost and Expenses. Costs and expenses were $171 million in the third quarter
of 1995 compared to $175 million in the second quarter. The decline was
primarily due to lower exploratory dry hole expense of $3 million in the third
quarter verses $7 million in the second quarter of 1995.
RESULTS OF OPERATIONS - 1994
The Company reported a third quarter 1994 net loss of $16 million or, after
preferred dividends, a loss of 19 cents per common share and year-to-date 1994,
the Company reported net income of $3 million or, after preferred dividends, a
loss of 23 cents per common share.
The third quarter 1994 results reflected initial production from all three of
the Company's South American operations--Ecuador, Bolivia and Venezuela--
resulting in $2 million of net income from these operations. The third quarter
1994 results also reflected a $13 million loss, recorded in "Other revenues,
net," from the sale of the Company's geothermal subsidiary, Thermal Power
Company.
The 1994 nine-month results included a $101 million pre-tax net benefit from the
Company's restructuring activities, which included the sale of Maxus' interest
in Diamond Shamrock Offshore Partners and certain oil and gas properties,
resulting in a pre-tax gain of $202 million. This gain was offset by
restructuring costs, including a $70 million write-off associated with Alaska
coal leases, the development of which did not fit within the Company's revised
strategy to commit funds only to oil and gas exploration and production. The
restructuring also included costs associated with staff reductions and the
write-offs of non-producing assets outside the Company's core areas.
Net worldwide crude oil sales of were 70 mbpd in the third quarter 1994.
Initial crude oil sales volumes in South America were 14 mbpd in the third
quarter 1994. The average worldwide oil price received in the third quarter
1994 was $16.54 per barrel.
U.S. natural gas sales for the third quarter 1994 were 211 million cubic feet
per day. The average gas price received in the United States was $1.72 per mcf
in the third quarter 1994.
Natural gas liquids sales in the U.S. were 18 mbpd for the third quarter 1994.
The average sales price for natural gas liquids in the third quarter 1994 was
$10.45 per barrel.
FINANCIAL CONDITION
The Company's net cash provided by operating activities was $16 million for the
six-month period ended September 30, 1995. The $25 million of net cash provided
by operating activities before working capital changes was reduced by working
capital requirements of $9 million. A decline of $24 million in accrued
liabilities due primarily to payment of Maxus incurred pre-Merger costs coupled
with higher inventories of $9 million were somewhat offset by a U.S. federal
income tax refund of $22 million.
On April 1, 1995, the Company had $92 million in cash and cash equivalents.
During the six-month period ended September 30, 1995, $96 million of short-term
investments were liquidated and $25 million of restricted cash was released.
Additionally, the Company received $851 million from the issuance of debt under
the Purchaser Facility and the Midgard and Holdings credit facilities and a $250
million capital infusion from YPF to partially fund the Merger. The Company's
operating activities provided $16 million. Additionally, the Company used $79
million for capital expenditures and $19 million for dividends. In connection
with the Merger, the Company repaid the Purchaser Facility, paid $745 million to
acquire the Shares outstanding at the Merger as well as Merger costs, leaving a
cash and cash equivalents balance of $33 million at September 30, 1995. Of the
approximate $762 million purchase price paid by YPF to acquire the Company, as
of September 30, 1995 $18 million remained to be paid in respect of Shares and
Merger costs. This liability was recorded in accrued liabilities.
The Company's exposure to foreign currency fluctuations is minimal as
substantially all of the Company's material foreign contracts are denominated in
U.S. dollars.
The Company's only derivative financial instruments are interest rate swap
agreements, natural gas price swap agreements and futures contracts, which are
not used for trading purposes. During the third quarter
22
<PAGE>
of 1995, the Company unwound its sole interest rate swap agreement and recorded
a $2.4 million gain in other revenues net.
See Note 7 to the Financial Statements for information regarding certain
environmental commitments and contingencies.
FUTURE OUTLOOK
Pursuant to the Merger Agreement, in the event that the Company is unable to
meet its obligations as they come due, whether at maturity or otherwise,
including, solely for the purposes of this undertaking, dividend and redemption
payments with respect to the Preferred Stock, YPF has agreed to capitalize the
Company in an amount necessary to permit the Company to meet such obligations;
provided that YPF's aggregate obligation will be: (i) limited to the amount of
debt service obligations under the Midgard credit facility and/or the
Subsidiaries credit facility and (ii) reduced by the amount, if any, of capital
contributions by YPF to the Company after the Merger Date and by the amount of
the net proceeds of any sale by the Company of common stock or non-redeemable
preferred stock after the Merger Date. The foregoing obligations of YPF (the
"Keepwell Covenant") will survive until the ninth anniversary of the Merger
Date. In addition, on March 7, 1995, YPF announced that its board of directors
authorized YPF to guarantee the Company's outstanding long-term debt as of the
Merger Date, the principal amount of which is approximately $977 million. The
long-term debt covered by the YPF guarantee is the Company's outstanding
11 1/4%, 11 1/2% and 8 1/2% Sinking Fund Debentures, its outstanding 9 7/8%, 9
1/2% and 9 3/8% Notes, and its outstanding medium-term notes. YPF has also
guaranteed the payment and performance of the Company's obligations to the
holders of its $9.75 Preferred Stock. It is anticipated that YPF will begin to
make capital contributions to the Company in the fourth quarter of 1995 to help
fund a portion of its exploration and development budget. Such contributions
will be credited to YPF's obligations under the Keepwell Covenant.
In addition to maintaining and developing its core areas (Mid-continent,
Indonesia and Ecuador) and emerging areas (Bolivia and Venezuela), it is
expected the Company will acquire or assume responsibility for certain YPF
exploration interests in South America (outside Argentina) and the U.S. Gulf of
Mexico. The Company will continue to focus on maximizing the value of its core
producing assets and seek new investment opportunities in new associated
ventures.
The Company's foreign petroleum exploration, development and production
activities are subject to political and economic uncertainties, expropriation of
property and cancellation or modification of contract rights, foreign exchange
restrictions and other risks arising out of foreign governmental sovereignty
over the areas in which the Company's operations are conducted, as well as risks
of loss in some countries due to civil strife, acts of war, guerrilla activities
and insurrection. Areas in which the Company has significant operations include
the United States, Indonesia, Ecuador, Bolivia and Venezuela.
The Company has begun discussions with various government entities in Ecuador
regarding a number of issues related to Block 16 and the Tivacuno area,
including the Company's cost recovery claims, the approval of budgets, contract
terms and other operating matters. The Company believes these matters will be
satisfactorily resolved.
23
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3(ii).1 -- Amendments to the By-Laws of the Company
3(ii).2 -- By-Laws of the Company, as amended
15.1 -- Letter of Arthur Andersen LLP regarding unaudited interim
financial statements
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K During the Quarter.
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAXUS ENERGY CORPORATION
By: Linda R. Engelbrecht
Linda R. Engelbrecht, Controller,
on behalf of the registrant and as
its chief accounting officer
November 9, 1995
24
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Title Exhibit No.
- ------------- -----------
<S> <C>
Amendments to the By-Laws of the Company 3(ii).1
By-Laws of the Company, as amended 3(ii).2
Letter of Arthur Andersen LLP regarding unaudited interim
financial Statements 15.1
Financial Data Schedule 27.1
</TABLE>
<PAGE>
EXHIBIT 3(ii).1
On November 2, 1995, the Company's By-Laws were amended as follows:
BY-LAW 5
The Company's By-Law 5 was amended to read as follows:
5. Special Meetings. Special meetings of the stockholders for any purpose
may be called by the Chairman of the Board of Directors and shall be promptly
called by the Chairman or by the Secretary at the written request of a majority
of the Board of Directors upon not fewer than 10 nor more than 60 days' written
notice. The request shall be sent to the Chairman and the Secretary and shall
state the purposes of the proposed meeting. Special meetings of holders of the
outstanding Preferred Stock may be called in the manner and for the purposes
provided in the resolutions of the Board of Directors providing for the issue of
such stock (a "Preferred Stock Designation"). Business transacted at special
meetings shall be confined to the purposes stated in the notice.
BY-LAW 15, PARAGRAPH (b)
The Company's By-Law 15, Paragraph (b) was amended to delete such paragraph
in its entirety.
BY-LAW 15, PARAGRAPH (c)
The Company's By-Law 15, Paragraph (c) was amended in its entirety to read
as follows:
(b) Newly created directorships and vacancies. Except as otherwise
provided for or fixed by or pursuant to the provisions of Article Fourth of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified circumstances, newly created
directorships resulting from any increase in the number of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled only by the affirmative
vote of a majority of the remaining Directors then in office, even though less
than a quorum of the Board of Directors. Any Director elected in accordance
with the preceding sentence shall hold office until such Director's successor
shall have been elected and qualified or until such Director's earlier
resignation or removal in accordance with the General Corporation Law of the
State of Delaware, the Certificate of Incorporation or these By-Laws. No
decrease in the number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director.
BY-LAW 15, PARAGRAPH (d)
The Company's By-Law 15, Paragraph (d) was amended in its entirety to read
as follows:
<PAGE>
(c) Removal. Subject to the rights of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation to elect
Directors under specified circumstances, any Director may be removed from office
only by the affirmative vote of the holders of at least 50% of the combined
voting power of the outstanding shares of stock entitled to vote generally in
the election of Directors, voting together as a single class.
BY-LAW 15, PARAGRAPH (e)
The Company's By-Law 15, Paragraph (e) was amended to redesignate it as By-
Law 15, Paragraph (d).
BY-LAW 22
The Company's By-Law 22 was amended to change the reference therein from
"Section (c) of By-Law 15" to "Section (b) of By-Law 15."
BY-LAW 34, PARAGRAPH (a)
The Company's By-Law 34 was amended to change the word "any" therein to the
word "either."
BY-LAW 35, PARAGRAPH (a)
The Company's By-Law 35, Paragraph (a) was amended to change the word "any"
therein to the word "either."
BY-LAW 36, PARAGRAPH (a)
The Company's By-Law 36, Paragraph (a) was amended to change the word "any"
therein to the word "either."
BY-LAW 43
The Company's By-Law 43 was amended to insert the word "days" following the
second numeral "60".
<PAGE>
EXHIBIT 3(ii).2
MAXUS ENERGY
CORPORATION
BY-LAWS
AS AMENDED
AND IN EFFECT
NOVEMBER 2, 1995
_______________________________________________
MAXUS ENERGY CORPORATION DALLAS, TEXAS 75201
1
<PAGE>
MAXUS ENERGY CORPORATION
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
OFFICES
1. Delaware............................................. 1
2. Dallas and Elsewhere................................. 1
STOCKHOLDERS' MEETINGS
3. Place................................................ 1
4. Annual Meeting....................................... 1
5. Special Meetings..................................... 1
6. Notice of Stockholder Business....................... 1
7. Inspectors........................................... 2
8. Quorum............................................... 2
9. Voting............................................... 2
10. List of Stockholders................................. 3
11. Order of Business.................................... 3
NOMINATION OF DIRECTOR CANDIDATES
12. Notification of Nominees............................. 3
13. Substitution of Nominees............................. 4
14. Compliance with Procedures........................... 4
DIRECTORS
15. Board of Directors................................... 4
16. Responsibilities..................................... 5
17. Powers............................................... 5
18. Compensation......................................... 5
19. Resignation.......................................... 5
20. Meetings............................................. 5
21. Notices.............................................. 5
22. Quorum............................................... 6
23. Committees of the Board of Directors................. 6
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
OFFICERS
24. Executive Officers................................... 6
25. Authority of the Board of Directors.................. 6
26. Term of Office....................................... 7
27. Compensation of Executive Officers................... 7
28. Other Officers and Agents............................ 7
29. Direction and Compensation of Other Officers......... 7
30. Bond................................................. 7
31. President............................................ 7
32. Vice Presidents...................................... 7
33. Secretary and Assistant Secretaries.................. 7
34. Treasurer and Assistant Treasurers................... 8
35. Controller and Assistant Controllers................. 8
36. General Counsel and Deputy and Assistant
General Counsels..................................... 8
INDEMNIFICATION
37. Damages and Expenses................................. 9
38. Insurance............................................ 12
STOCK RECORDS
39. Form of Certificates................................. 13
40. Classes of Stock: Rights............................. 13
41. Transfers............................................ 13
42. Lost Certificates.................................... 13
43. Record Dates......................................... 13
GENERAL
44. Contracts, Checks, Etc............................... 14
45. Fiscal Year.......................................... 14
46. Annual Statement..................................... 14
47. Form of Notices...................................... 14
48. Seal................................................. 14
49. By-Law Amendment..................................... 14
50. Certificate of Incorporation and Applicable Law...... 15
</TABLE>
iii
<PAGE>
BY-LAWS
OFFICES
1. Delaware. The Corporation's registered office in the State of Delaware
shall be in the City of Wilmington, County of New Castle, State of Delaware, and
the name of the registered agent in charge thereof is The Corporation Trust
Company.
2. Dallas and Elsewhere. The Corporation shall also have an office at
such place in the City of Dallas, County of Dallas, State of Texas, and may
also have offices at such other places, as the Board of Directors may from time
to time appoint or the business of the Corporation may require.
STOCKHOLDERS' MEETINGS
3. Place. Meetings of the stockholders shall be held at such place as the
Board of Directors shall determine.
4. Annual Meeting. The annual meeting of the stockholders for the
election of Directors, the receiving of reports and the transaction of such
other business as may properly be brought before the meeting shall be held on
such date and at such time as the Board of Directors determines.
5. Special Meetings. Special meetings of the stockholders for any purpose
may be called by the Chairman of the Board of Directors and shall be promptly
called by the Chairman or by the Secretary at the written request of a majority
of the Board of Directors upon not fewer than 10 nor more than 60 days' written
notice. The request shall be sent to the Chairman and the Secretary and shall
state the purposes of the proposed meeting. Special meetings of holders of the
outstanding Preferred Stock may be called in the manner and for the purposes
provided in the resolutions of the Board of Directors providing for the issue of
such stock (a "Preferred Stock Designation"). Business transacted at special
meetings shall be confined to the purposes stated in the notice.
6. Notice of Stockholder Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly be requested to be brought before the
meeting by a stockholder. For business to be properly
1
<PAGE>
requested to be brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than 80 days prior to the meeting; provided, however, that in the event
that the date of the meeting is not publicly announced by the Corporation 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
Corporation 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. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. Notwithstanding anything in the By-Laws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this By-Law 6. The chairman of an
annual meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of this By-Law 6, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
7. Inspectors. The Board of Directors shall appoint inspectors of
election to act as judges of the voting and to determine those entitled to vote
at any stockholders' meeting, or any adjournment thereof, in advance of such
meeting, but if the Board of Directors fails to make such appointments or if an
appointee fails to serve, the chairman of the stockholders' meeting may appoint
substitute inspectors.
8. Quorum. Except as otherwise provided in a Preferred Stock Designation,
the holders of stock having a majority of voting power entitled to vote at any
stockholders' meeting, present in person or represented by proxy, shall
constitute a quorum for the transaction of business thereat. If, however, such
majority shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time without notice,
other than announcement at the meeting of the time and place of the adjourned
meeting, until the requisite amount of voting stock shall be present or
represented or the meeting has been adjourned permanently. At such adjourned
meeting, at which the requisite amount of voting stock shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally called.
9. Voting. At each meeting of the stockholders, every stockholder having
the right to vote shall be entitled to vote in person or by proxy appointed by a
legally sufficient instrument. The vote for Directors, the vote upon any
questions set forth in the Proxy Statement for the meeting and the vote upon any
other action of business at the discretion of the chairman of the
stockholders' meeting shall be by written ballot. The vote upon any other
question before the meeting shall be by written ballot upon the demand of
stockholders voting at least 15% of the shares represented at the meeting. All
questions, except election or removal of Directors or as otherwise provided in
these By-Laws, the
2
<PAGE>
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") or the Preferred Stock Designation for any series of Preferred
Stock, shall be decided by a majority vote of those shares present or
represented and voting, and, with respect to any election or question to be
decided by any class of stock voting as a class, by a majority vote of those
shares present or represented and voting of that class.
10. List of Stockholders. A complete list of the stockholders entitled to
vote at any meeting shall be available for examination by such persons for any
proper purpose, for such period of time and at such place as is required by law.
11. Order of Business. Unless otherwise determined by the Board of
Directors prior to the meeting, the chairman of the stockholders' meeting shall
determine the order of business and shall have the authority in his discretion
to regulate the conduct of any such meeting, including, without limitation, by
imposing restrictions on the persons (other than stockholders of the Corporation
or their duly appointed proxies) who may attend any such stockholders' meeting,
whether any stockholder or his proxy may be excluded from any stockholders'
meeting based upon any determination by the chairman, in his sole discretion,
that any such person has unduly disrupted or is likely to disrupt the
proceedings thereat, and the circumstances in which any person may make a
statement or ask questions at any stockholders' meeting.
NOMINATION OF DIRECTOR CANDIDATES
12. Notification of Nominees. Subject to the rights of holders of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, nominations for the election of Directors may 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. However, any stockholder entitled to vote in the election of
Directors generally may nominate one or more persons for election as Directors
at a meeting only if written notice of such stockholder's intent to make such
nomination or nominations has been received by the Secretary of the Corporation
not less than 80 days in advance of such meeting; provided, however, that in the
event that the date of the meeting was not publicly announced by the Corporation
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
Corporation 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. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote for the election of Directors on the
date of such notice and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement
3
<PAGE>
filed pursuant to the proxy rules of the Securities and Exchange Commission, had
the nominee been nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a director of the
Corporation if so elected.
13. Substitution of Nominees. In the event that a person is validly
designated as a nominee in accordance with By-Law 12 and shall thereafter
become unable or unwilling to stand for election to the Board of Directors, the
Board of Directors or the stockholder who proposed such nominee, as the case may
be, may designate a substitute nominee upon delivery, not fewer than five days
prior to the date of the meeting for the election of such nominee of a written
notice to the Secretary setting forth such information regarding such substitute
nominee as would have been required to be delivered to the Secretary pursuant
to By-Law 12 had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a Director of the
Corporation, if elected, of each such substitute nominee.
14. Compliance with Procedures. If the chairman of the meeting for the
election of Directors determines that a nomination of any candidate for election
as a Director at such meeting was not made in accordance with the applicable
provisions of By-Laws 12 and 13, such nomination shall be void; provided,
however, that nothing in By-Laws 12 or 13 shall be deemed to limit any voting
rights upon the occurrence of dividend arrearages provided to holders of
Preferred Stock pursuant to the Preferred Stock Designation for any series of
Preferred Stock.
DIRECTORS
15. Board of Directors.
(a) Number, election and terms. Except as otherwise fixed by, or pursuant
to the provisions of, Article Fourth of the Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional Directors under specified circumstances, the number of the Directors
of the Corporation shall be eight (8) unless otherwise fixed from time to time
by resolution of the Board of Directors, but shall be fixed at no fewer than
three (3) nor more than fifteen (15).
(b) Newly created directorships and vacancies. Except as otherwise
provided for or fixed by or pursuant to the provisions of Article Fourth of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified circumstances, newly created
directorships resulting from any increase in the number of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled only by the affirmative
vote of a majority of the remaining Directors then in office, even though less
than a quorum of the Board of Directors. Any Director elected in accordance
with the preceding sentence shall hold
4
<PAGE>
office until such Director's successor shall have been elected and qualified or
until such Director's earlier resignation or removal in accordance with the
General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these By-Laws. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
(c) Removal. Subject to the rights of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation to elect
Directors under specified circumstances, any Director may be removed from
office only by the affirmative vote of the holders of at least 50% of the
combined voting power of the outstanding shares of stock entitled to vote
generally in the election of Directors, voting together as a single class.
(d) Chairman of the Board. The Board may elect one of its members
Chairman of the Board, who shall preside at all meetings of the Board. The
Chairman of the Board shall also preside at all meetings of stockholders unless
the Board of Directors designates another person to preside.
16. Responsibilities. The business and affairs of the Corporation shall
be managed under the direction of the Board of Directors.
17. Powers. In addition to the powers and authorities expressly conferred
by these By-Laws, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
18. Compensation. The Board of Directors may establish such compensation
for, and reimbursement of the expenses of, Directors for attendance at meetings
of the Board of Directors or committees, or for other services by Directors to
the Corporation, as the Board of Directors may determine.
19. Resignation. Any Director may resign at any time by giving written
notice of his resignation to the President or the Secretary.
20. Meetings. Immediately after the adjournment of the annual meeting of
the stockholders each year, the Directors elected thereat shall, without notice,
convene the annual meeting of Directors for the organization of the Board of
Directors, the election of officers and members of committees and the
transaction of any other business which may properly come before the meeting.
If a quorum of the Board of Directors shall not be present, the President shall
call a meeting for such purposes as promptly as is practicable. Except as
otherwise provided in this By-Law 20, Directors may hold their regular and
special meetings at such times and places and have one or more offices and keep
the books of the Corporation at such places as the Board of Directors
determines.
21. Notices. No notice of regular meetings of the Board of Directors need
be given. Special meetings of the Board of Directors may be called by the
President upon notice to each Director, given either in person or by mail,
telephone, telegram, telex or similar medium of communication; special
5
<PAGE>
meetings shall be called by the President or the Secretary on like notice, on
the written request of three Directors. At least 24 hours' notice of special
meetings shall be given to each Director.
22. Quorum. Subject to the provisions of Section (b) of By-Law 15, at all
meetings of the Board of Directors, a majority of the total number of Directors
shall constitute a quorum for the transaction of business and, except for the
designation of committees (as provided in By-Law 23) and the removal of
executive officers (as provided in By-Law 25), the act of a majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum is not present, a majority of the Directors
present may adjourn the meeting without notice other than announcement until a
quorum is present.
23. Committees of the Board of Directors. The Board of Directors, by
resolution passed by a majority of the whole Board of Directors, may designate
one or more committees, each committee to consist of two or more Directors. A
committee shall have and exercise the powers of the Board of Directors in the
direction of the management of the business and affairs of the Corporation to
the extent provided in the resolution. Each committee shall have such name as
may be determined by the Board of Directors. Except as may be otherwise
provided in a resolution or resolutions duly adopted by the Board of Directors,
a majority of the members of a committee shall constitute a quorum and a
majority vote of the members at a meeting at which a quorum is present shall be
the act of the committee. A committee shall keep minutes of its proceedings,
and shall report its proceedings to the Board of Directors when required or when
requested by a Director to do so.
OFFICERS
24. Executive Officers. At the annual meeting of the Board of Directors
each year, or such other times as the Board of Directors may determine, the
Board of Directors may elect the following executive officers:
President
One or more Vice Presidents
General Counsel
Treasurer
Controller
25. Authority of the Board of Directors. The executive officers shall
have the duties, responsibilities and authorities as are reflected in these By-
Laws or in resolutions of the Board of Directors, but at all times the actions
of the executive officers shall be subject to the review, delegation,
redetermination, direction and control of the Board of Directors. Any number of
executive offices may be held by the same person. The President shall be a
member of the Board of Directors. At any meeting the Board of Directors may
elect additional executive officers, fill vacancies and, by vote of a majority
of the whole Board of Directors, remove any executive officer.
6
<PAGE>
26. Term of Office. An executive officer shall hold office until he
retires, resigns or is removed by majority vote of the whole Board of Directors.
An officer may resign at any time by giving written notice of his resignation to
the President or the Secretary.
27. Compensation of Executive Officers. The executive officers shall
receive such compensation as shall be fixed by the Board of Directors.
28. Other Officers and Agents. The President may appoint the Secretary,
such Assistant Secretaries, Assistant Treasurers, Assistant Controllers, Deputy
General Counsels, Assistant General Counsels and other officers and agents as
the President shall deem necessary or proper in the conduct of the affairs of
the Corporation with such designations, titles, seniority, duties and
responsibilities as he shall deem advisable. The President shall report
appointments of other officers and agents to the Board of Directors.
29. Direction and Compensation of Other Officers. All officers and agents
appointed by the President shall perform their duties under the direction of the
President and shall receive compensation as from time to time shall be fixed by
the President and shall hold their offices at the pleasure of the President.
30. Bond. If required by the Board of Directors, any and every officer or
agent shall give the Corporation a bond in a sum and with one or more sureties
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
31. President. The President shall be the chief executive officer of the
Corporation. He shall have such duties and responsibilities as may be assigned
to him by the Board of Directors. He shall be the senior officer of the
Corporation and shall have overall responsibility for the management and
direction of the business and affairs of the Corporation. In addition, he shall
perform such other duties and services and shall have such other authority and
responsibilities as shall be assigned to or required of him from time to time by
the Board of Directors or the Executive Committee of the Board of Directors.
32. Vice Presidents. Each Vice President, however titled, shall perform
such duties and services and shall have such authority and responsibilities as
shall be assigned to or required of him from time to time by the Board of
Directors, the Executive Committee of the Board of Directors or the President.
33. Secretary and Assistant Secretaries.
(a) The Secretary shall attend all meetings of the stockholders and all
meetings of the Board of Directors and record all proceedings of the meetings of
the stockholders and of the Board of Directors, and he shall perform like duties
for the standing committees when requested by the Board of Directors or the
President. He shall give, or cause to be given, notice of all meetings of the
stockholders and
7
<PAGE>
meetings of the Board of Directors. He shall perform such duties as may be
prescribed to him by the President. He shall have charge of the seal of the
Corporation and authority to affix the seal to any instrument. He or any
Assistant Secretary may attest to the corporate seal by handwritten or facsimile
signature. The Secretary shall keep and account for all books, documents,
papers and records of the Corporation except those for which some other officer
or agent has been designated or is otherwise properly accountable. He shall
have authority to sign stock certificates.
(b) Assistant Secretaries, in the order of their seniority, shall assist
the Secretary and, if the Secretary is unavailable or fails to act, perform the
duties and exercise the authorities of the Secretary.
34. Treasurer and Assistant Treasurers.
(a) The Treasurer shall have the custody of the funds and securities
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Treasurer with the prior approval of the Chairman or
the President. He shall disburse the funds and pledge the credit of the
Corporation as may be directed by the Board of Directors and shall render to the
Board of Directors and the President, as and when required by them, or either of
them, an account of all his transactions as Treasurer.
(b) Assistant Treasurers, in the order of their seniority, shall assist the
Treasurer and, if the Treasurer is unable or fails to act, perform the duties
and exercise the powers of the Treasurer.
35. Controller and Assistant Controllers.
(a) The Controller shall be the chief accounting officer of the
Corporation. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation in accordance with accepted
accounting methods and procedures. He shall initiate periodic audits of the
accounting records, methods and systems of the Corporation. He shall render to
the Board of Directors and the President, as and when required by them, or
either of them, a statement of the financial condition of the Corporation.
(b) Assistant Controllers, in the order of their seniority, shall assist
the Controller and, if the Controller is unable or fails to act, perform the
duties and exercise the powers of the Controller.
36. General Counsel and Deputy and Assistant General Counsels.
(a) The General Counsel shall be the chief legal officer of the
Corporation. He shall provide legal counsel and advice to the Board of
Directors and to the officers with respect to compliance with applicable laws
and regulations. He shall also provide or obtain legal defense of the
Corporation. He shall render to the Board of Directors and the President, as
and when required by them, or either of them, a report on the status of claims
against, and pending litigation of, the Corporation.
8
<PAGE>
(b) Deputy and Assistant General Counsels, in the order of their seniority,
shall assist the General Counsel and, if the General Counsel is unable or fails
to act, perform the duties and exercise the powers of the General Counsel.
INDEMNIFICATION
37. Damages and Expenses.
(a) Actions, Suits or Proceedings Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a Director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges, expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not meet the standards of conduct set forth in
this Section (a).
(b) Actions or Suits by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was or has agreed to become a Director, officer, employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, against
costs, charges and expenses (including attorney's fees) actually and reasonably
incurred by him or on his behalf in connection with the defense or settlement of
such action or suit and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of such liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such costs, charges and expenses which the Court of Chancery or
such other court shall deem proper.
9
<PAGE>
(c) Indemnification for Costs, Charges and Expenses of Successful Party.
Notwithstanding the other provisions of this By-Law 37, to the extent that a
Director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise, including, without limitation, the dismissal of an
action without prejudice, in defense of any action, suit or proceeding referred
to in Sections (a) and (b) of this By-Law 37, or in the defense of any claim,
issue or matter therein, he shall be indemnified against all costs, charges and
expenses (including attorneys' fees) actually and reasonably incurred by him or
on his behalf in connection therewith.
(d) Determination of Right to Indemnification. Any indemnification under
Sections (a) and (b) of this By-Law 37 (unless ordered by a court) shall be
paid by the Corporation unless a determination is made (1) by the Board of
Directors by a majority vote of a quorum consisting of Directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders, that indemnification of the Director, officer, employee or agent
is not proper in the circumstances because he has not met the applicable
standards of conduct set forth in Sections (a) and (b) of this By-Law 37.
(e) Advance of Costs, Charges and Expenses. Costs, charges and expenses
(including attorneys' fees) incurred by a person referred to in Sections (a) and
(b) of this By-Law 37 in defending a civil or criminal action, suit or
proceeding (including investigations by any government agency and all costs,
charges and expenses incurred in preparing for any threatened action, suit or
proceeding) shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding; provided, however, that the payment of such
costs, charges and expenses incurred by a Director or officer in his capacity as
a Director or officer (and not in any other capacity in which service was or is
rendered by such person while a Director or officer) in advance of the final
disposition of such action, suit or proceeding shall be made only upon receipt
of an undertaking by or on behalf of the Director or officer to repay all
amounts so advanced in the event that it shall ultimately be determined that
such Director or officer is not entitled to be indemnified by the Corporation as
authorized in this By-Law 37. No security shall be required for such
undertaking and such undertaking shall be accepted without reference to the
recipient's financial ability to make repayment. The repayment of such charges
and expenses incurred by other employees and agents of the Corporation which are
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding as permitted by this Section (e) may be required upon such terms
and conditions, if any, as the Board of Directors deems appropriate. The Board
of Directors may, in the manner set forth above, and subject to the approval of
such Director, officer, employee or agent of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
(f) Procedure for Indemnification. Any indemnification under Sections (a),
(b), or (c) or advance of costs, charges and expenses under Section (e) of this
By-Law 37 shall be made promptly, and in any event within 60 days, upon the
written request of the Director, officer, employee or agent directed to the
Secretary of the Corporation. The right to indemnification or advances as
granted by this By-Law 37 shall be enforceable by the Director, officer,
employee or agent in any court of competent jurisdiction
10
<PAGE>
if the Corporation denies such request, in whole or in part, or if no
disposition thereof is made within 60 days. Such person's costs and expenses
incurred in connection with successfully establishing his right to
indemnification or advances, in whole or in part, in any such action shall also
be indemnified by the Corporation. It shall be a defense to any such action
(other than an action brought to enforce a claim for the advance of costs,
charges and expenses under Section (e) of this By-Law 37 where the required
undertaking, if any, has been received by the Corporation) that the claimant has
not met the standard of conduct set forth in Sections (a) or (b) of this By-Law
37, but the burden of proving that such standard of conduct has not been met
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors, its independent legal counsel, and its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in Sections (a) and (b) of this
By-Law 37, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors, its independent legal counsel,
and its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(g) Other Rights; Continuation of Right to Indemnification. The
indemnification provided by this By-Law 37 shall not be deemed exclusive of any
other rights to which a person seeking indemnification may be entitled under any
law (common or statutory), agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office or while employed by or acting
as agent for the Corporation, and shall continue as to a person who has ceased
to be a Director, officer, employee or agent and shall inure to the benefit of
the estate, heirs, executors and administrators of such person. All rights to
indemnification under this By-Law 37 shall be deemed to be a contract between
the Corporation and each Director, officer, employee or agent of the Corporation
who serves or served in such capacity at any time while this By-Law 37 is in
effect. No amendment or repeal of this By-Law 37 or of any relevant provisions
of the Delaware General Corporation Law or any other applicable laws shall
adversely affect or deny to any Director, officer, employee or agent any rights
to indemnification which such person may have, or change or release any
obligations of the Corporation, under this By-Law 37 with respect to any costs,
charges, expenses (including attorneys' fees), judgments, fines, and amounts
paid in settlement which arise out of an action, suit or proceeding based in
whole or substantial part on any act or failure to act, actual or alleged, which
takes place before or while this By-Law 37, as adopted by the Board of Directors
of the Corporation on April 17, 1986, is in effect. The provisions of this
Section (g) shall apply to any such action, suit or proceeding whenever
commenced, including any such action, suit or proceeding commenced after any
amendment or repeal of this By-Law 37.
(h) For purposes of this By-Law:
(1) "the Corporation" shall include any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power
and authority to indemnify its Directors, officers, and employees or
agents, so that any person who is or was a Director, officer, employee or
agent of such constituent corporation, or is or was serving at the request
of such constituent corporation as a Director, officer, employee or agent
of another
11
<PAGE>
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this By-Law 37 with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued;
(2) "other enterprises" shall include employee benefit plans,
including but not limited to any employee benefit plan of the Corporation;
(3) "serving at the request of the Corporation" shall include any
service which imposes duties on, or involves services by, a Director,
officer, employee, or agent of the Corporation with respect to an employee
benefit plan, its participants, or beneficiaries, including acting as a
fiduciary thereof;
(4) "fines" shall include any penalties and any excise or similar
taxes assessed on a person with respect to an employee benefit plan;
(5) A person who acted in good faith and in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in
Sections (a) and (b) of this By-Law 37;
(6) Service as a partner, trustee or member of management or similar
committee of a partnership or joint venture, or as a Director, officer,
employee or agent of a corporation which is a partner, trustee or joint
venturer, shall be considered service as a Director, officer, employee or
agent of the partnership, joint venture, trust or other enterprise.
(i) Savings Clause. If this By-Law 37 or any portion hereof shall be
invalidated on any ground by a court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Director, officer, employee and
agent of the Corporation as to costs, charges and expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Corporation, to the
full extent permitted by any applicable portion of this By-Law 37 that shall not
have been invalidated and to the full extent permitted by applicable law.
38. Insurance. The Corporation shall purchase and maintain insurance on
behalf of any person who is or was or has agreed to become a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him or on his behalf in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of By-Law 37, provided that such insurance is available on acceptable
terms as determined by a vote of a majority of the entire Board of Directors.
12
<PAGE>
STOCK RECORDS
39. Form of Certificates. The certificates representing stock of the
Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall exhibit the holder's name and number
of shares and shall be mechanically signed with a facsimile of the signature of
the President or a Vice President, and a facsimile of the signature of the
Secretary or an Assistant Secretary, and shall also be signed by, or bear the
facsimile signature of, a duly authorized officer or agent of any properly
designated transfer agent of the Corporation. Such certificates may be issued
and delivered notwithstanding that the person whose facsimile signature appears
thereon shall have ceased to be such officer at the time the certificates are
issued and delivered.
40. Classes of Stock: Rights. The designations, preferences and relative
participating, optional or other special rights of the various classes of stock
or series thereof, and the qualifications, limitations or restrictions thereof,
shall be set forth in full or summarized on the face or back of the certificates
which the Corporation issues to represent its stock, or in lieu thereof, such
certificates shall set forth the office of the Corporation from which the
holders of certificates may obtain a copy of such information.
41. Transfers. Subject to restrictions on the transfer of stock, the
Corporation shall make transfers of stock on its books upon surrender of the
certificate for the shares to the Corporation or its duly appointed transfer
agent duly endorsed by the stockholder named in the certificate or his duly
authorized attorney.
42. Lost Certificates. An executive officer may direct a new certificate
to be issued in place of certificates theretofore issued by the Corporation and
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. As a condition precedent to the issuance thereof, the officer may
require the claimant to advertise the alleged loss, theft or destruction in such
manner as the officer may require and to give the Corporation a bond in such sum
as he may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed or the issuance of the new certificate.
43. Record Dates. The Board of Directors may fix in advance a date, not
more than 60 days nor fewer than 10 days prior to the date of any meeting of
stockholders, nor more than 60 days prior to the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, as a record
date for the determination of the stockholders entitled to notice of, and to
vote at, any such meeting and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock and in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting and any adjournment thereof, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise
13
<PAGE>
such rights, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as aforesaid.
GENERAL
44. Contracts, Checks, Etc. All contracts, agreements, checks, drafts,
notes, bonds, bills of exchange and orders for the payment of money shall be
signed or endorsed by the persons whom the Board of Directors prescribes
therefor.
45. Fiscal Year. The fiscal year of the Corporation shall be the calendar
year, except as otherwise determined from time to time by the Board of
Directors.
46. Annual Statement. The Board of Directors shall cause an independent
public accountant, selected from time to time by the Board of Directors, to
examine in accordance with generally accepted auditing standards, prior to the
annual meeting of the stockholders in each year, the books and records of the
Corporation and the financial statements for the preceding fiscal year, which
statements shall set forth the financial position as of the close of, and the
results of operations of the Corporation for, the preceding fiscal year, and
the Board of Directors shall cause such accountant or firm of accountants to
render to the Board of Directors its opinion with respect thereto. The Board of
Directors shall cause copies of the financial statements together with the
opinion to be sent to all stockholders entitled to vote at the annual meeting in
the year succeeding the year to which the financial statements apply and to be
available to stockholders attending the annual meeting.
47. Form of Notices. Whenever notice is required to be given to any
Director or officer or stockholder, such notice may be given either in person or
by mail, telephone or telegram, telex or similar medium of communication, except
as provided in By-Law 6, By-Law 12 or By-Law 21. Except as provided in By-Law
6, By-Law 12 or By-Law 21, if mailed, the notice will be deemed given when
deposited in the United States mail, postage prepaid, addressed to the
stockholder, officer or Director at such address as appears on the books of the
Corporation, or, in default of other address, to such Director, officer or
stockholder at the General Post Office in the City of Dallas, Texas, or the City
of Cleveland, Ohio. If given in person or by telephone, notice will be deemed
given when communicated, and if given by telegram, telex or similar medium of
communication, notice will be deemed given when properly dispatched. Any
stockholder, Director or officer may waive any notice required to be given
under these By-Laws.
48. Seal. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
49. By-Law Amendment. Subject to the provisions of the Certificate of
Incorporation, these By-Laws may be altered, changed, amended or repealed at any
regular meeting of the stockholders (or at any special meeting thereof duly
called for that purpose) by a majority vote of the shares represented
14
<PAGE>
and entitled to vote at such meeting; provided that in the notice of such
special meeting notice of such purpose shall be given. Subject to the laws of
the State of Delaware, the Certificate of Incorporation and these By-Laws, the
Board of Directors may by majority vote of those present at any meeting at which
a quorum is present amend these By-Laws, or enact such other By-Laws as in their
judgement may be advisable for the regulation of the conduct of the affairs of
the Corporation.
50. Certificate of Incorporation and Applicable Law. These By-Laws are
subject to the provisions of the Certificate of Incorporation and applicable
law.
15
<PAGE>
EXHIBIT 15.1
Maxus Energy Corporation:
We are aware that Maxus Energy Corporation has incorporated by reference
in its Registration Statements No. 33-61350 on Form S-3 and No. 33-6693,
No. 33-28353, No. 33-47538, No. 33-55857, No. 33-55938, No. 33-55918 and
No. 2-85403 on Form S-8 its Form 10-Q for the quarter ended September 30,
1995, which includes our report dated October 24, 1995, covering the
unaudited interim financial information contained therein. Pursuant to
Regulation C of the Securities Act of 1933, that report is not considered
a part of the registration statement prepared or certified by our firm or
a report prepared or certified by our firm within the meaning of Sections
7 and 11 of the Act.
ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Dallas, Texas
October 24, 1995
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