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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9/A
(Amendment No. 3)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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MAXUS ENERGY CORPORATION
(Name of Subject Company)
MAXUS ENERGY CORPORATION
(Name of Person Filing Statement)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
577730 10 4
(CUSIP Number of Class of Securities)
McCarter Middlebrook, Esq.
Vice President and General Counsel
Maxus Energy Corporation
717 North Harwood Street
Dallas, Texas 75201-6594
(214) 953-2000
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person filing statement)
Copy to:
Robert A. Profusek, Esq.
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
(212) 326-3939
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This Amendment No. 3 amends the Solicitation/Recommendation Statement on
Schedule 14D-9 filed on March 3, 1995, as amended by Amendment No. 1 thereto
filed on March 6, 1995 and Amendment No. 2 thereto filed on March 9, 1995 (as
heretofore amended, the "Schedule 14D-9"), by Maxus Energy Corporation, a
Delaware corporation (the "Company"), in connection with the tender offer (the
"Offer") commenced on March 3, 1995 by YPF Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of YPF Sociedad Anonima, a sociedad
anonima organized under the laws of the Republic of Argentina ("YPF"), to
purchase all outstanding shares of common stock, par value $1.00 per share, of
the Company (the "Shares") at a price of $5.50 per share, net to seller in cash.
All capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
Item 4 of the Schedule 14D-9 is hereby amended by deleting Item 4(b) in its
entirety and adding the following:
(b) Background of the Board Recommendation. In light of, among other
factors, the limitations on the Company's financial flexibility resulting
from, among other things, the pressures from continuing depressed oil and
gas prices and the Company's limited access to the capital markets,
balanced against the Company's obligations and its exploration,
development, and production program to maximize the value of and/or replace
the Company's oil and gas reserves, in mid-1994 the Company began exploring
financial alternatives available to it. The alternatives considered
involved a broad range of possible actions, including potential sales of
assets, subsidiaries or divisions, joint ventures, public debt and equity
offerings of securities of several of the Company's subsidiaries, private
sales of equity securities of such subsidiaries, and possible sales of a
substantial equity interest in the Company. Management of the Company
decided to study all reasonable alternatives available to the Company to
increase the Company's financial flexibility and maximize stockholder
value. CS First Boston Corporation ("CSFB") acted as the Company's
financial advisor with respect to this effort.
One of the alternatives given serious consideration was a combined
public offering of equity and debt securities by the Company's mid-
continent gas production and processing operations, later to be named
"Midgard" (the "Midgard Offering Alternative"). On December 20, 1994,
Midgard filed with the Commission a registration statement relating to the
possible public offering of approximately 37.5% of its common stock. This
filing (the "Initial Filing") assumed an overall enterprise valuation of
Midgard of approximately $600 million. At the time of the Initial Filing,
the Company and CSFB estimated that the offering, together with an expected
concurrent offering of $200 million of debt securities, would result in net
proceeds of approximately $340 million, which would be used to retire
indebtedness of Midgard to the Company. On January 9, 1995, Midgard filed
with the Commission a registration statement relating to the possible
public offering of $200 million of debt securities of Midgard.
As an alternative to the possible public offerings of Midgard equity
and debt securities, the Company, with the assistance of CSFB, also
solicited offers for the private sale of a minority interest in Midgard,
commencing in the latter part of 1994. Approximately 70 possible financial
and strategic investors were contacted during this process, 14 of which
visited the Midgard data room in order to conduct due diligence
investigations with respect to Midgard.
Subsequent to the Initial Filing, the prices for natural gas, which
represent virtually all of Midgard's 1994 production and current reserves,
remained depressed, thus reducing the potential value to the Company of the
Midgard Offering Alternative. The Midgard Offering Alternative continued
to be pursued and, as discussed below, was considered by the Board in
connection with its consideration of other alternatives at the time the
Offer and the Merger Agreement were approved by the Board. However, in
connection with and in light of such approval (discussed below), the
Company agreed
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to suspend its pursuit of the Midgard Offering Alternative (or any other
sale of equity securities or substantial assets) pursuant to the Merger
Agreement.
In November 1994, Amoco Corporation ("Amoco") contacted the Company
and indicated that it desired to initiate discussions relating to the
possible acquisition of the entire equity interest in the Company, which
transaction might involve a spin-off to the Company's stockholders of some
portion of the Company's South American assets. A confidentiality
agreement with Amoco was signed in November 1994. During November and
December of 1994, the Company, with the assistance of CSFB, furnished to
Amoco extensive information relating to the Company's business, financial
condition, results of operations, and prospects. This extensive due
diligence investigation included visits to the Company's principal
worldwide locations. Amoco, however, did not choose to engage in
substantive negotiations with respect to an acquisition of the entire
equity interest in the Company. Instead, on January 27, 1995, Amoco
informed the Company that it desired to pursue the possible acquisition of
Midgard and/or the Company's Indonesian subsidiaries.
In early December 1994, Mr. Blackburn met with YPF's Chief Executive
Officer. The principal focus of the discussions at this meeting was the
companies' respective operations and the possible purchase by YPF of a
substantial equity interest in the Company. The companies signed a
confidentiality agreement, and over the following three-month period YPF
and its representatives undertook an extensive due diligence investigation
of the Company.
In mid-January 1995, CSFB, on behalf of the Company, requested that 16
potential bidders submit proposals in respect of a range of possible
transactions, including the possible sale of a minority interest in
Midgard, the possible sale of a substantial equity interest in the Company,
and the possible acquisition of the entire equity interest in the Company.
On January 24, 1995, an article appeared in Platt's Oilgram News, a
leading industry publication, reporting that the Company may be pursuing
alternatives to the Midgard Offering Alternative. On January 25, 1995, the
Company publicly announced that it was in discussions with various parties
concerning a range of possible transactions, including possible equity
investments or other transactions involving the Company or its
subsidiaries.
At the meeting of the Board on January 30 and 31, 1995, CSFB reported
that none of the potential financial or strategic investors it had
solicited had expressed an interest in pursuing the acquisition of a
minority interest in Midgard. However, CSFB informed the Board that a
number of proposals had been received for the acquisition of the entire
equity interest in, or substantially all of the assets of, Midgard (the
"Midgard Disposition Alternative"). These proposals included an indication
of interest from Amoco to acquire Midgard's assets for an amount in excess
of $605 million, as well as other proposals, one of which was believed by
CSFB and management of the Company to be generally competitive with Amoco's
indication of interest on an after-tax basis. In addition, CSFB reported
that Amoco had made an unsolicited offer to purchase the Company's
Indonesian properties for $585 million. Amoco's offer for the Company's
Indonesian properties was, however, substantially below the valuation
placed on such assets by management and CSFB.
At the meeting of the Board on January 30 and 31, 1995, the Board also
considered a proposal received on January 27, 1995 from YPF to acquire all
of the Shares at $5.00 per Share in cash, subject to a number of
conditions, including satisfactory completion of due diligence and
obtaining financing. None of the alternatives considered by the Board at
the January 30 and 31, 1995 meeting was believed by management of the
Company to be acceptable due to the terms and conditional nature thereof.
Although no decision was made with respect to the course of action to
be taken, the Board instructed the Company's management at the January 30
and 31, 1995 meeting to continue to explore all reasonable alternatives,
following which CSFB, on behalf of the Company, requested the four parties
who had submitted the most attractive indications of interest in respect of
the Midgard Disposition Alternative, including
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Amoco, to submit final proposals by February 21, 1995. In addition, CSFB
requested that YPF consider increasing its prior proposal for the possible
acquisition of all of the Shares at $5.00 per Share in cash and also
consider a substantial equity investment in the Company.
On February 21, 1995, the Company received proposals in respect of the
Midgard Disposition Alternative from three potential purchasers, the most
favorable of which was from Amoco (the "Amoco Alternative"). The Amoco
Alternative contemplated a purchase of Midgard's assets and contained two
alternative purchase prices -- either $675 million in cash or $500 million
in cash and a volumetric-denominated production payment ("VPP") consisting
of approximately 60 mmcfd of gas declining to 20 mmcfd over a ten-year
period. The Amoco Alternative was subject to certain conditions, including
satisfactory completion of due diligence, negotiation of definitive
agreements, approval by Amoco's Board of Directors, and the agreement by
the Company to negotiate exclusively with Amoco. In its February 21, 1995
proposal, Amoco also expressed an interest in pursuing a transaction which
would include both Midgard and the Company's Indonesian subsidiaries.
Amoco subsequently indicated a possible price for those assets which, in
the opinion of management and CSFB, would have made such a transaction
substantially less attractive than either the Amoco Alternative relating to
only the Midgard assets or the YPF Alternative (described below).
In addition, on February 25, 1995, the Company received a proposal
from YPF (the "YPF Alternative") to acquire all of the Shares for $5.50 per
Share, which proposal contemplated that holders of Rights would receive an
additional $0.10 per Share (payable by the Company) in connection with the
redemption of the Rights. The YPF Alternative was subject to certain
conditions, the most significant of which were the receipt of financing,
Prudential's approval of the transaction and waiver of certain rights under
the terms of the $9.75 Preferred Stock held by it and certain related
agreements, approval of YPF's Board of Directors (which was obtained on
February 27, 1995), and the redemption of the Rights.
At a meeting of the Board held on February 26, 1995, the Board
carefully considered the Amoco Alternative, the Midgard Offering
Alternative, and the YPF Alternative. Management expressed the opinion
that the VPP proposed in the Amoco Alternative had an estimated net present
value of $200 million. Management and CSFB also informed the Board that,
in their opinion, the Amoco Alternative that included the VPP was more
attractive than Amoco's all-cash offer due to its tax efficiency and would
yield to the Company a net present value of approximately $605 million on
an after-tax basis. In addition, management and CSFB were of the opinion
that there was relatively low execution risk associated with the Amoco
Alternative and that the transaction could be completed expeditiously.
At the February 26, 1995 Board meeting, CSFB presented its estimates
of potential values of Midgard to a third-party purchaser using four cases:
a discounted cash flow ("DCF") going concern case, a break-up case, a
comparable acquisitions case, and a public companies case. Depending on
pricing assumptions (discussed below) and based upon a range of discount
rates applicable to the DCF going concern case ranging between 8% and 10%,
the value of Midgard was estimated by CSFB to range from a low of $427
million to a high of $681 million. Applying the comparable acquisitions
case, CSFB informed the Board that the estimated value of Midgard ranged
from a low of $539 million to a high of $641 million. Under the break-up
case, CSFB informed the Board that the estimated value of Midgard ranged
from a low of $529 million to a high of $660 million. CSFB also informed
the Board that the estimated value of Midgard as an entirety in an initial
public offering in the current market environment was in the range of $475
million to $515 million. Management informed the Board at this meeting of
its belief that the Amoco Alternative was superior to the Midgard Offering
Alternative in terms of meeting the Company's anticipated funding
requirements. However, while the Amoco Alternative appeared to solve the
Company's anticipated funding requirements, management believed it would
not be effective to reduce the Company's financial leverage. It was also
management's belief that the Amoco Alternative, as compared to the YPF
Alternative, would result in less financial flexibility for the Company by
making the Company smaller while essentially retaining its present credit
characteristics and relatively high cost of capital.
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At the February 26, 1995 Board meeting, management and CSFB also made
detailed presentations regarding the YPF Alternative, including the
proposed financing of up to $800 million to be provided to YPF by The Chase
Manhattan Bank (National Association) ("Chase"). CSFB also presented a
review of YPF, including its operations and financial resources. CSFB
informed the Board, among other things, that YPF had very substantial
capital resources and that CSFB believed YPF could readily complete the YPF
Alternative. The Board was also informed as to the status of several
unresolved issues with respect to the YPF Alternative, including the break-
up fee to be paid in the event of a termination of the Offer or the Merger,
the Keepwell Covenant which the Company had requested from YPF, and various
issues relating to the Company's outstanding Preferred Stock.
The price for the Shares under the YPF Alternative had been set,
following extensive negotiations between representatives of the Company and
CSFB, on the one hand, and YPF, on the other, at $5.50 per Share plus $0.10
(payable by the Company) upon redemption of the Rights. It was the
opinion of management and CSFB that the financial terms of the YPF
Alternative represented YPF's best price. Accordingly, at the February 26,
1995 meeting, the Board also heard presentations from CSFB and management
of the Company regarding the range of values for the Shares under the Amoco
Alternative, the Midgard Offering Alternative, and also assuming that the
Company elected to pursue none of the alternatives (the "Status Quo Case").
It was the consensus of the Board, based in part on the views expressed at
the February 26, 1995 Board meeting by CSFB and management, that the Status
Quo Case was not a realistic alternative for the Company in light of the
Company's anticipated funding requirements and limited access to the
capital markets.
CSFB's valuation ranges for Shares discussed at the February 26, 1995
Board meeting were determined through application of the DCF going concern
analysis, which CSFB informed the Board was its primary valuation method,
and other alternative techniques, including a comparable acquisition
analysis, a comparable company analysis, a break-up analysis, and a
simplified proved reserve value analysis ("SPRV analysis"), a valuation
technique developed by the Company for internal planning purposes. In
making its analyses, CSFB relied on certain assumptions, including a
weighted average cost of capital for the Company of 12% to 12.5% and three
different energy price assumptions based on CSFB's determination of the
forecasts of oil and gas prices (the "Base Price Assumption"), existing
prices in the futures markets (the "Strip Price Assumption"), and assuming
significant increases over the Base Price Assumption (the "Upside Price
Assumption"). The Base Price Assumption assumed prices of $18.50 per barrel
("bl") of oil and $1.70 per thousand cubic feet ("mcf") of natural gas in
1995, increasing to $23.00 per bl of oil and $2.35 per mcf of natural gas
by 1999; the Strip Price Assumption assumed prices of $18.01 per bl of oil
and $1.58 per mcf of natural gas in 1995, increasing to $19.16 per bl of
oil and $2.09 per mcf of natural gas by 1999; and the Upside Price
Assumption assumed prices of $20.00 per bl of oil and $1.80 per mcf of
natural gas in 1995, increasing to $26.00 per bl of oil and $2.50 per mcf
of natural gas in 1999.
Under the DCF going concern analysis, CSFB valued the Amoco
Alternative at between $4.50 and $4.75 per Share; the other valuation
techniques, taken together, produced a valuation range from $3.50 to $5.625
per Share. The Midgard Offering Alternative produced a valuation range
under the DCF going concern analysis of $3.00 to $3.50 per Share and a
valuation range of $3.25 to $4.50 per Share under the other valuation
techniques, taken together. The Status Quo Case produced a valuation range
of $2.75 to $5.75 per Share under the DCF going concern analysis and a
valuation range of $0.375 to $5.75 per Share under the other valuation
techniques, taken together. However, CSFB advised the Board that
valuations using the DCF going concern analysis in excess of $5.00 per
Share could be obtained only based upon the Upside Price Assumption, and
that this assumption was believed to have a low probability of occurrence
in the opinion of CSFB. In addition, the Company's management presented the
Board with management's valuation analysis, based primarily on the SPRV
analysis, which showed an implied Share price of $3.35 to $6.17 per Share,
with an expected value of $4.94 per Share. Such analysis was based on
management's assumptions in the Company's business plan regarding oil
prices and assumed implementation of the Company's business plan.
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At the February 26, 1995 meeting, the Board also received
presentations from management of the Company, CSFB, and the Company's legal
advisors in respect of the status of the Midgard Offering Alternative,
legal matters, the Company's business and prospects, historical trading
prices for Shares, YPF's business, financial condition, and prospects, and
the potential effects of the various alternatives then available on
stockholder value and the Company's financial position. The Board did not
take any action in respect of any alternatives available to the Company at
the February 26, 1995 Board meeting. The Board did, however, instruct
management of the Company to engage in further negotiations with YPF in an
effort to resolve the various points (discussed below) arising under the
YPF Alternative.
At a meeting held on February 28, 1995, the Board again considered the
alternatives available to the Company. As to the material points still
open in the YPF Alternative at the time of the February 26, 1995 meeting,
the Board was informed that YPF had agreed to the Keepwell Covenant which
would obligate YPF to contribute assets to the Company (to the extent
Company assets were utilized in connection with the financing of the YPF
Alternative) for the purpose of enabling the Company to meet its
obligations, including solely for this purpose preferred stock dividends
and redemption payments. The Board was also informed that, although the
Company's representatives had initially requested that the Keepwell
Covenant continue indefinitely, YPF had requested a time limit with respect
to this obligation. A nine-year period was believed by the Company's
management to be acceptable because most of the Company's outstanding debt
and preferred stock redemption requirements occurred within that period.
The Board was also informed that YPF had agreed to a break-up fee of $20
million, without any expense reimbursement, in the event the Company
elected to terminate the Merger Agreement and had also agreed to pay the
Company $20 million in the event that the Offer or the Merger were not
completed due to the failure of YPF to obtain financing, subject to certain
limitations. Further, the Board was informed that YPF had agreed to a
covenant under which YPF and the Company would use their respective
reasonable efforts to continue the listing of the $4.00 Preferred Stock and
the $2.50 Preferred Stock on the NYSE or to obtain an alternative listing
therefor. YPF also had agreed to include preferred stock dividend and
redemption payments within the scope of the Keepwell Covenant and had
informed the Company's advisors that YPF did not anticipate making any
disclosure of any plans or proposals to change the Company's existing
preferred stock dividend policy. Finally, YPF had negotiated the
Prudential Preferred Waiver Agreement with Prudential.
Management and CSFB also reviewed with the Board the presentations
made at the February 26, 1995 meeting relating to the estimated Share
valuation under the various alternatives. Management informed the Board
that the Company would lose approximately $75 million of anticipated annual
cash flow generated by the Midgard assets if the Amoco Alternative were
elected. In addition, in the opinion of management of the Company, the
Amoco Alternative was unlikely to produce value to the holders of Shares in
excess of the purchase price proposed by YPF. Further, it was management's
opinion that the Amoco Alternative would result in the Company having
materially diminished financial flexibility going forward.
CSFB reviewed with the Board its presentation of the value of the
Company on a per Share basis under various assumptions, reiterating that to
arrive at a value of $5.00 per Share or more under a DCF going concern
analysis required the use of the Upside Price Assumption and that, in the
opinion of CSFB, such assumption had a low probability of occurrence.
While certain of the above-discussed valuation methods produced higher or
lower possible values, in general, CSFB placed the per Share value of the
Company in the range of $3.00 to $5.00 per Share. At the February 28, 1995
meeting, CSFB also reviewed a draft of its proposed fairness opinion,
including the assumptions and limitations thereon, the compensation due
CSFB in the event that the Company were to pursue the alternatives then
under consideration, and CSFB's interests and relationships with respect to
both the Company and YPF. CSFB then informed the Board that, if the Board
were to approve the YPF Alternative, CSFB would deliver a signed fairness
opinion at the time that the Merger Agreement was signed.
At the February 28, 1995 meeting, the Board also reviewed the
potential impact of the Offer and the Merger on the holders of the
Company's $4.00 Preferred Stock and $2.50 Preferred Stock,
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including the possibility that, as a result thereof, such shares would be
delisted from trading on the NYSE. As to this matter, CSFB informed the
Board that an active market for these shares presently exists and that it
was possible that such securities could be listed on another exchange. In
addition, CSFB stated that, in its opinion, there should be no material
adverse effect on the value of these securities even if they were traded
only in the over-the-counter market.
At the February 28, 1995 meeting, the Board also heard presentations
from management of the Company, CSFB, and the Company's legal advisors as
to various other matters, including additional information relating to
YPF's business, financial condition, and prospects, conditions in the bank
finance and capital markets generally and as affected by recent events in
the Republic of Mexico and other Latin and South American countries, and
the Company's capital requirements and financial position.
Following further deliberation, the Board unanimously voted, with the
director elected by Prudential abstaining, to approve the YPF Alternative.
In making the determination and recommendations set forth in paragraph
(a) above, the Board considered a number of factors, including without
limitation the matters referred to above in this Item 4(b) and the
following:
(i) The alternatives available to the Company and the
consideration to be received for the Shares pursuant to the Offer and
Merger. In connection with its analysis of this issue, among other
factors, the Board considered detailed presentations from CSFB and
management of the Company at the February 26 and 28, 1995 Board
meetings as to the range of possible values of Shares, based upon the
various assumptions discussed above, including without limitation
assumptions as to oil and gas prices, the Company's ability to execute
its business plan, and the alternatives available to the Company. It
was the consensus of the Board that the Company should elect either
the Amoco Alternative or the YPF Alternative (as modified in the
negotiations that took place between the February 26 and the February
28, 1995 Board meetings) and that the YPF Alternative (as so modified)
was more likely to create substantially greater value for holders of
the Shares than would the Amoco Alternative.
(ii) The opinion of CSFB to the effect that, as of February 28,
1995, the consideration to be received by the holders of the Shares in
the Offer and the Merger was fair to such holders from a financial
point of view. A copy of such opinion is filed as Exhibit 6 hereto.
Stockholders are urged to read such opinion in its entirety for an
understanding of the assumptions and limitations thereon and CSFB's
interests and relationships with respect to both the Company and YPF.
(iii) The provisions of the Merger Agreement, including the
provisions which permit the Company to terminate the agreement, upon
payment to YPF of $20 million, if the Board determines to withdraw its
recommendation to holders of Shares to accept the Offer based upon the
advice of outside counsel that such action is necessary to comply with
the fiduciary duties of the directors under applicable law.
(iv) The fact that, under the YPF Alternative, YPF's and
Purchaser's obligations under the Offer were subject to financing. In
this regard, the Board considered, among other things, the terms of
the commitment letter YPF had obtained to provide financing (see Item
8 below), the financial condition of YPF and the Company, conditions
in the bank finance and capital markets as described above, the
Keepwell Covenant, and the provision of the Merger Agreement that the
Company would be entitled to a $20 million termination fee, subject to
certain limitations (see "Termination Fees; Expenses" in Item 3(b)(2)
above), if such financing is not satisfied.
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(v) YPF's direct investment in connection with the Offer and
Merger, as well as YPF's financial condition and ability to meet its
obligations under the Merger Agreement.
(vi) The fact that the Preferred Stock would not be redeemed or
otherwise monetized in connection with the Offer and the Merger. In
this regard, the Board considered, among other factors, (a) the terms
of the Preferred Stock; (b) the provisions of the Prudential Preferred
Waiver Agreement, which had been negotiated between representatives of
YPF and Prudential relating to the $9.75 Preferred Stock without
substantial participation by representatives of the Company; (c) the
possibility that the $4.00 Preferred Stock and the $2.50 Preferred
Stock might be delisted from trading on the NYSE and possibly other
securities exchanges on which the $4.00 Preferred Stock and the $2.50
Preferred Stock are now listed or admitted for trading as a result of
the Offer or the Merger, the covenant in the Merger Agreement to the
effect that the parties would use their reasonable efforts to maintain
such listings or provide for listing or admission for trading of such
Preferred Stock on another exchange or market, and advice of CSFB to
the effect that the failure to obtain such alternative listing or
admission should not have a material adverse effect on the value of
such Preferred Stock; and (d) the Keepwell Covenant and the
representation of YPF in the Merger Agreement to the effect that it
had no reason to believe that, following the Merger and financings in
respect thereof, the Company would not be able to meet its obligations
as they become due, including for this purpose the obligation to cause
dividends and redemption payments on all series of Preferred Stock to
be paid in accordance with the terms thereof.
(vii) The provisions of the Merger Agreement and other matters
described in Item 3(b)(2) above.
In making its decision in respect of the Offer and the Merger Agreement,
the Board did not attempt to rank the relative importance of the various
factors discussed in this Item 4(b). However, the Company generally
believes that the factors listed in this paragraph were the most
significant factors pertaining to such decision.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Item 8 of the Schedule 14D-9 is hereby amended and supplemented by adding
the following after the third paragraph under Item 8(b):
On March 15, 1995, the Company received a letter from a law firm that
purports to represent holders of the Company's $2.50 Preferred Stock and
$4.00 Preferred Stock (the "Preferred Stockholders"). In its letter, a
copy of which is filed as Exhibit 10 hereto, the law firm demands that the
Company commence suit on behalf of the Preferred Stockholders against the
directors and officers of the Company for alleged breaches of their
fiduciary duties in connection with the Offer and the Merger. In addition,
the Company has received communications from other stockholders and
debtholders that raise concerns or threaten litigation in connection with
the Offer and the Merger.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following exhibits are filed herewith:
Exhibit 8* - Letter to Stockholders of the Company, dated March 17, 1995.
Exhibit 9 - Amended Complaint filed in Miriam Sarnoff, et al. v. Maxus Energy
Corp., et al.
Exhibit 10 - Letter, dated March 15, 1995, from Mitchell, Kristl & Lieber.
Exhibit 11 - Press Release, dated March 13, 1995.
Exhibit 12 - Press Release, dated March 15, 1995.
____________
* Included in the materials sent to stockholders of the Company.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
MAXUS ENERGY CORPORATION
By: McCARTER MIDDLEBROOK
--------------------------
McCarter Middlebrook
Vice President and General Counsel
Dated: March 20, 1995
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
Exhibit 8 Letter to Stockholders of the Company, dated March 17, 1995.
Exhibit 9 Amended Complaint filed in Miriam Sarnoff, et al. v. Maxus Energy
Corp., et al.
Exhibit 10 Letter, dated March 15, 1995, from Mitchell, Kristl & Lieber.
Exhibit 11 Press Release, dated March 13, 1995.
Exhibit 12 Press Release, dated March 15, 1995.
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Exhibit 8
[Maxus letterhead]
March 20, 1995
Dear Stockholder:
Approximately two weeks ago, we sent you a copy of Maxus Energy
Corporation's Solicitation/Recommendation Statement on Schedule 14D-9 relating
to the tender offer by a subsidiary of YPF Sociedad Anonima ("YPF") to purchase
all outstanding Maxus Common Stock (the "Shares") at $5.50 per Share, net to the
seller in cash. The YPF tender offer was made pursuant to a previously
announced merger agreement between Maxus and YPF.
Enclosed is an amended Statement on Schedule 14D-9. The amendment includes
additional information relating to the background of the Board's recommendation
regarding the YPF tender offer (see Item 4(b)). It also reports certain
developments that have occurred since the time of the original Schedule 14D-9
Statement in Item 8, including in respect of certain stockholder litigation.
THE BOARD OF DIRECTORS OF MAXUS HAS DETERMINED THAT THE YPF OFFER AND
MERGER ARE IN THE BEST INTERESTS OF THE STOCKHOLDERS OF MAXUS AND RECOMMENDS
THAT STOCKHOLDERS ACCEPT THE YPF OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
We encourage you to read the enclosed materials carefully.
Sincerely,
/s/ CHARLES L. BLACKBURN
-------------------------
Charles L. Blackburn
Chairman, President and
Chief Executive Officer
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Exhibit 9
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
MIRIAM SARNOFF, FREDERICK RAND (S)
and JAMES D. TURNER, (S)
(S)
Plaintiffs, (S)
(S) Civil Action No. 14079
- against - (S)
(S)
MAXUS ENERGY CORP., CHARLES L. (S)
BLACKBURN, B. CLARK BURCHFIEL (S)
BRUCE B. DICE, MICHAEL C. FORREST, (S)
CHARLES W. HALL, RAYMOND A. HAY, (S)
GEORGE L. JACKSON, JOSE MARIA (S)
PEREZ ARTETA, RICHARD W. MURPHY, (S)
J. DAVID BARNES, R. A. WALKER, (S)
THOMAS YORK, JOHN T. KIMBELL, (S)
YPF SOCIEDAD ANONIMA and (S)
YPF ACQUISITION CORP., (S)
(S)
Defendants. (S)
AMENDED COMPLAINT
-----------------
Plaintiffs, by their attorneys, allege upon information and belief,
except with respect to their ownership of Maxus Energy Corp. ("Maxus" or the
"Company") common stock as follows:
PARTIES
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1. Plaintiffs are the owners of shares of defendant Maxus.
2. Defendant Maxus is a Delaware corporation with executive offices
at 717 North Harwood Street, Dallas, Texas 75201. Maxus is a holding company
with subsidiaries which explore for and produce oil and gas, purchase, gather
and process natural gas, and produce natural gas liquids. As of September 30,
1994, Maxus had approximately 134 million shares of common stock outstanding
held by over 35,000 shareholders of record.
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3. Defendant YPF Acquisition Corp. is a Delaware corporation and a
wholly owned subsidiary of YPF Sociedad Anonima ("YPF"). Defendant YPF Sociedad
Anonima is a sociedad anonima organized under the laws of the Republic of
Argentina. YPF and YPF Acquisition had knowledge of or recklessly disregarded,
and substantially participated in the breaches of fiduciary duty alleged herein
and thus, are liable as aiders and abettors.
4. Defendant Charles L. Blackburn is Chairman of the Board,
President, Chief Executive Officer and a Director of Maxus. In 1993, Blackburn
received salary, bonus and other compensation of approximately $640,000.
5. Defendant Michael C. Forrest is Vice Chairman, Chief Operating
Officer and a Director of Maxus. In 1993, Forrest received salary, bonus and
other compensation of approximately $375,000.
6. Defendants Darrell L. Black, George L. Jackson, John T. Kimbell,
Richard W. Murphy, Jose Maria Perez Arteta, J. David Barnes, B. Clark Burchfiel,
Bruce B. Dice, Charles W. Hall, Raymond A. Hay, W. Thomas York and R.A. Walker
are Directors of Maxus.
7. The foregoing individual directors of Maxus (collectively the
"Individual Defendants"), by reason of their corporate directorships (and in the
case of defendant Blackburn and Forrest, their executive positions), stand in a
fiduciary position relative to the Company's shareholders, which fiduciary
relationship, at all times relevant herein, required the Individual Defendants
to exercise their best judgment, and to
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act in a prudent manner, and in the best interests of the Company's
shareholders. They were and are required to use their ability to control and
manage the Company in a fair, just and equitable manner; to act in furtherance
of the best interests of the Company's shareholders; to refrain from abusing
their positions of control; and not to favor their own interests at the expense
of the Company's shareholders.
CLASS ACTION ALLEGATION
-----------------------
8. Plaintiffs bring this action on their own behalf and as a class
action on behalf of all shareholders of defendant Maxus (except defendants
herein and any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in interest, who have
been or will be adversely affected by the conduct of defendants alleged herein.
9. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is brought
is so numerous that joinder of all class members is impracticable. As of
September 30, 1994, there were over 134 million shares of defendant Maxus'
common stock outstanding owned by over 35,000 shareholders of record scattered
throughout the United States.
(b) There are questions of law and fact which are common to members of
the Class and which predominate over any questions affection any individual
members. The common questions include, inter alia, the following:
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i. Whether one or more of the Individual Defendants has engaged in
a plan and scheme to enrich themselves at the expense of defendant Maxus' public
stockholders;
ii. Whether the Individual Defendants have breached their fiduciary
duties of care, loyalty and candor owed by them to plaintiffs and members of the
Class, and/or aided and abetted in such breach, by virtue of their participation
and/or acquiescence and by their other conduct complained of herein;
iii. Whether the Individual Defendants have wrongfully failed
adequately to seek out a purchaser of Maxus at the highest possible price and,
instead, have allowed the valuable assets of defendant Maxus to be acquired by
YPF at an unfair and inadequate price;
iv. Whether the Transaction is timed when the market is not
reflecting the true value of Maxus' shares; and
v. Whether plaintiffs and the other members of the Class will be
irreparably damaged by the transactions complained of herein.
10. The prosecution of separate claims would create a risk of either
inconsistent or varying adjudications concerning individual members of the
Class, which would establish incompatible standards of conduct for the party
opposing the Class, and adjudications concerning individual members of the Class
would, as a practical matter, be dispositive of the interests of other members
of the Class who are not parties to the adjudications or substantially impair or
impede the ability of other members of the class who are not parties to the
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adjudications, to protect their interests. The defendants have acted on grounds
generally applicable to all members of the Class, making relief concerning the
Class as a whole appropriate.
11. Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature. The claims
of plaintiffs are typical of the claims of the other members of the Class and
plaintiffs have the same interest as the other members of the Class.
Accordingly, plaintiffs are adequate representatives of the Class and will
fairly and adequately protect the interests of the Class.
12. Plaintiffs anticipate that there will not be any difficulty in
the management of this litigation.
13. For the reasons stated herein, a class action is superior to
other available methods for the fair and efficient adjudication of this action.
MAXUS ANNOUNCES
AN AGREEMENT WITH YPF
---------------------
14. Participants in the oil and gas industry have recognized Maxus'
potential value, including YPF, which entered into the agreement described
below, and Amoco, which has been reportedly interested in entering into a
business combination with Maxus.
15. On February 28, 1995, it was announced that Maxus and YPF signed
an agreement pursuant to which YPF would acquire all of the common shares of
Maxus' stock for $5.50 per share by way of a tender offer and follow-up merger
(the "Transaction"). Maxus common shareholders are also to receive $.10 a share
upon
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the redemption of rights issued pursuant to Maxus' shareholder rights plan
("Poison Pill"). Maxus' Board has approved the Transaction and recommended that
Maxus' shareholders accept the offer. On March 3, 1995, YPF Acquisition, a
Delaware subsidiary of YPF, commenced its tender offer for all of the shares of
Maxus at $5.50 per share (the "Tender Offer") and filed its Schedule 14D-1 and
Offer to Purchase (collectively the "Schedule 14D-1"), and Maxus filed its
original 14D-9. On March 6, 1995, Maxus filed Amendment No. 1 to its 14D-9
("Schedule 14D-9"). As described below, the Schedule 14D-9 is materially
deficient in violation of fiduciary duties owed by the Maxus Board to Maxus'
common stockholders.
BACKGROUND OF THE TRANSACTION
-----------------------------
16. In 1994, the Company engaged CS First Boston ("First Boston") to
render investment advisory services. First Boston subsequently entered into a
January 23, 1996 engagement letter with Maxus. However, First Boston was not
requested to and did not solicit third party indications of interest in
acquiring all or any part of the Company, except in regard to Midgard Energy Co.
("Midgard"). Moreover, an officer of First Boston is an alternate member of the
board of YPF, and First Boston has, from time to time, provided investment
banking services to YPF. Pursuant to the First Boston engagement, the Company
has agreed to pay First Boston, in the event of the sale of all or substantially
all of the shares in connection with the sale of the Company, .45% of the total
enterprise value of the Company as determined pursuant to the First Boston
engagement
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letter. If the Transaction is consummated, it is estimated that First Boston
will receive approximately $8 million in fees. In contrast, if there were only
a sale of all, substantially all or a minority interest in Maxus' operating
unit, Midgard, First Boston would receive up to a maximum of $5 million.
17. According to the Schedule 14D-9, the Company began exploring
alternatives in the latter half of 1994, including a public offering of the
Company's Midgard unit. In that connection, on December 20, 1994, Midgard filed
with the SEC a registration statement with respect to the possible public
offering of approximately 37.5% of Midgard common stock, which together with an
expected subsequent offering of $200 million of debt securities, would have
resulted in net proceeds of approximately $340 million to be used to retire
indebtedness of Midgard to the Company. Together with First Boston, the Company
also solicited offers for the private sale of a minority interest in Midgard.
In the late fall of 1994, the Company was contacted by an unnamed strategic
buyer ("Company I") that indicated its desire to initiate discussions regarding
the possible acquisition of the entire equity interest in the Company. On or
about January 27, 1995, Company I purportedly informed Maxus that it was not
interested in pursuing an acquisition of the entire company, but rather had a
desire to pursue the possible acquisition of Midgard and/or the Company's
Indonesian subsidiaries.
18. Also, according to the Schedule 14D-9, in early December 1994,
Blackburn met with YPF's Chief Executive Officer
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to discuss the possible purchase by YPF of a substantial equity interest in the
Company. The Schedule 14D-9 also states that First Boston requested in mid-
January that potential bidders submit proposals, including any interest in
purchasing a minority interest in Midgard, the possible sale of a substantial
equity interest in Maxus, and the possible acquisition of the entire equity
interest in Maxus. Certain unnamed strategic buyers expressed an interest in
acquiring the entire equity interest or substantially all of the assets of
Midgard, but not a minority interest. Subsequent thereto, First Boston
requested that interests in acquiring all or substantially all of the assets of
Midgard be submitted by February 21, 1995. First Boston also requested that YPF
consider increasing its prior proposal to acquire all of Maxus' shares at $5.00
per share. The Schedule 14D-9 does not indicate when such an offer was received
by Maxus. On February 21, 1995, the Company received proposals regarding
acquisitions of all or substantially all of Midgard and indicated that the most
favorable to the Company was that received from Company I.
19. On February 25, 1995, the Company received a proposal from YPF
to acquire all of the shares of Maxus for $5.50 per share, which also
contemplated that the holders of its Poison Pill rights would receive an
additional $.10 per share in connection with the redemption of the rights. On
February 28, 1995, the Company determined to accept and approve the YPF
Transaction and forego any further consideration of a sale of Midgard.
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MATERIALLY MISLEADING AND DEFICIENT DISCLOSURES
-----------------------------------------------
20. The Schedule 14D-9 states that Maxus was contacted by "a possible
strategic buyer" that indicated a desire to initiate substantive discussions
relating to the possible acquisition of the entire equity interest in the
Company. However, the Schedule 14D-9 fails to identify the "possible strategic
buyer" referring to the entity only as "Company I".
21. The Schedule 14D-9 fails to disclose the details regarding
discussions and negotiations between Maxus and Company I regarding the sale of
Maxus as an entire entity. Moreover, the Schedule 14D-9 states that the
unidentified Company I advised the Company on January 27, 1995 that it was no
longer interested in pursuing the possible acquisition of the entire equity
interest in the Company but desired to pursue the possible acquisition of
Midgard and/or the Company's Indonesian subsidiaries. The Schedule 14D-9 also
indicates that the Company received other indications of interest in acquiring
Midgard, and that the indication of interest judged most favorable to the
Company by management was from Company I. The Schedule 14D-9, however, does not
disclose the details or terms of any such indications of interest, including no
disclosure of the terms or details of the Company I proposal.
22. Moreover, the Schedule 14D-9 states that it was the consensus of
the Board that the Company should elect either the indication of interest by
Company I for the acquisition of Midgard or the proposal from YPF, and that the
YPF proposal was more likely to create substantially greater value for holders
of
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Maxus common shares than the acquisition of Midgard by the unidentified Company
I. However, the Schedule 14D-9 provides no details as to the basis for the
conclusion that the Company should elect either the YPF proposal or the
disposition of Midgard to Company I, or the basis for the conclusion that the
YPF proposal was more likely to create substantially greater value for
stockholders.
23. The Schedule 14D-9 states that in early December 1994, Blackburn
and YPF's Chief Executive Officer met to discuss "a wide variety of possible
transactions, including the possible purchase by YPF of a substantial equity
interest in the Company." The Schedule 14D-9 states that YPF and the Company
discussed "a variety of possible transactions and transaction structures
involving a possible alignment of the businesses of both the Company and YPF."
The Schedule 14D-9, however, fails to identify the other possible transactions
discussed.
24. The Schedule 14D-9 states that in mid-January 1995, First Boston
requested that potential bidders submit proposals in respect of a range of
possible transactions, including a minority interest in Midgard, the possible
sale of a substantial equity interest in the Company, and the possible
acquisition of the entire equity interest in the Company. In fact, the Schedule
14D-9 states that YPF "and other interested parties were advised that the
Company wished to receive proposals from all parties interested in an investment
in or purchase of all of the Company, or the purchase of Midgard." (emphasis
added). The First Boston opinion states that a number of
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companies approached the Company with respect to an acquisition of all or a
substantial part of the Company and that First Boston engaged in discussions
with "such interested parties." The Schedule 14D-9, however, fails to disclose
the details of discussions with the potential bidders or interested parties.
25. The Schedule 14D-9 states that none of the potential financial or
strategic investors contacted by First Boston expressed an interest in pursuing
the acquisition of a minority interest in Midgard, but that a number of possible
strategic buyers expressed an interest in acquiring the entire equity interest
in or substantially all of the assets of Midgard. Moreover, the Schedule 14D-9
discloses that at a January 31, 1995 Board meeting, the Board purportedly
reviewed information concerning the alternatives then available to the Company,
and that management did not believe any of the expressions of interest to be
acceptable due to their terms and conditional nature. the Schedule 14D-9,
however, does not disclose the "alternatives" considered, the details or terms
of the expressions of interest or the persons from whom the expressions were
received.
26. The Schedule 14D-9 also, at various places, vaguely refers to
"alternatives available to the Company." The Schedule 14D-9, however, fails to
articulate or describe these alternatives available.
27. The Schedule 14D-9 also states that at a February 28, 1995 Board
meeting, the Company again considered the "alternatives then available" and the
Board heard presentations
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from management, First Boston and the Company's legal advisors with respect to,
among other things, the negotiations with YPF as to "points still open" with
respect to the YPF proposal. However, the Schedule 14D-9 provides no details of
First Boston's analysis regarding the various alternatives, any explanation as
to the "points still open," or how such open points were resolved.
28. The Schedule 14D-9 also fails to disclose the details of the
substance of the discussions and negotiations between YPF and Maxus regarding
YPF's acquisition of Maxus.
29. The Schedule 14D-9 states that in connection with its analysis of
the alternatives available to the Company and the consideration to be received
for the Maxus shares pursuant to the Transaction, the Board considered detailed
presentations from First Boston and management at the February 26 and 28, 1995
Board meetings as to the range of possible values of the Maxus shares, based on
various assumptions, including assumptions as to oil and gas prices, the
Company's ability to execute its business plan, the alternatives available to
the Company, and other factors. However, the Schedule 14D-9 contains no details
regarding the assumptions or the presentations from First Boston or management.
Nor is there any disclosure regarding the range of values for Maxus' shares.
Indeed, there are no particulars concerning First Boston analyses underlying its
fairness opinion, such as any discounted cash flow analysis, comparable
acquisition analysis or comparable publicly traded companies analysis.
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MAXUS' AND YPF'S SIDE AGREEMENTS
--------------------------------
30. In connection with the Transaction, the Company has agreed to pay
$20 million to YPF Acquisition in the event of the termination of the Merger
Agreement ("Termination Fee"). Maxus has also agreed with YPF that it would not
solicit any other potential bidders for Maxus or its assets and would not even
discuss a transaction with or provide information to an unsolicited bidder
unless it receives an opinion of counsel that it is so required.
31. Defendant Blackburn, Maxus' Chairman, President and CEO, will
purportedly resign those positions if the Transaction is consummated. However,
YPF has requested that Blackburn serve as an international consultant to YPF and
remain a director of the Company following the Merger, pursuant to which
Blackburn would be paid an annual retainer of $500,000 and have offices in
Dallas and Buenos Aires. The initial term of the consulting arrangement is two
years. Blackburn will also receive, if he surrenders his employee stock
options, approximately $1.1 million, and may also receive termination payments
of $2.7 million.
32. Pursuant to the Company's Restated Certificate of Incorporation,
Prudential Insurance Company of America ("Prudential"), the current holder of
all of the outstanding shares of the Company's $9.75 Cumulative Convertible
Preferred Stock (the "Prudential Preferred Stock") must approve of the Merger in
order for it to be consummated. On February 28, 1995, the Company and
Prudential entered into an agreement pursuant to
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which Prudential agreed to consent to the Merger, to waive certain rights, to
waive certain covenants restricting the Company's abilities to take certain
action, and to terminate the registration rights associated with the Prudential
Preferred Stock. The Company agreed to waive certain rights, including the
right to redeem the Prudential Preferred Stock, and the right of first refusal
with respect to the transfer of such stock, and to pay Prudential a
restructuring fee of $250,000 upon the consummation of the Merger. YPF also has
agreed to guarantee the payment and performance of the obligations of the
Company to the registered owners of the Prudential Preferred Stock.
33. Further, the Transaction was agreed to and timed when Maxus'
trading price was not reflecting its true value. Indeed, Maxus stock traded as
high as $5.75 per share in July, 1994.
34. Moreover, Maxus previously instituted the Poison Pill which
serves as an impediment to a possible acquisition by any other potential
acquiror, including Amoco. The Poison Pill seeks to make and does make any
unfriendly takeover of the Company too costly for any potential acquiror. The
Poison Pill was promulgated and has subsequently been continued by the
Individual Defendants and effectively deters competitive bidding for Maxus.
35. Furthermore, the Poison Pill creates an unlevel playing field
between a bidder for the Company and management, if it is not a bidder that is
specifically chosen by management. It provides a competitive advantage to YPF,
and provides additional
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defenses to management against a takeover by an unfriendly third party, even if
that party were truly willing to offer a fair price for the outstanding Maxus
stock. Although management typically takes the position that shareholder rights
plans provide them with leverage to ensure a fair market price to all
shareholders from an acquiror, here the real leverage it gives them is to, in
effect, chill the market for Maxus stock or unilaterally veto any other offer.
36. The proposed Transaction is wrongful, unfair and harmful to
Maxus' public stockholders, the Class members. The proposed Transaction will
deny plaintiffs and other Class members their rights to share appropriately in
the true value of the Company's assets and future growth in profits and
earnings, while usurping the same for the benefit of defendant YPF at an unfair
and inadequate price.
37. The Individual Defendants, acting in concert, have violated their
fiduciary duties owed to the public shareholders of Maxus and put certain of
defendants' own personal interests and the interests of defendant YPF ahead of
the interests of the Maxus public shareholders.
38. The Individual Defendants failed to (1) undertake an adequate
evaluation of Maxus' worth as a potential merger/acquisition candidate; (2) take
adequate steps to enhance Maxus' value and/or attractiveness as a
merger/acquisition candidate; or (3) effectively expose Maxus to the marketplace
in an effort to create an active and open auction for Maxus. Instead,
defendants have agreed to and timed a sale of Maxus at a
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price for the shares of Maxus stock that does not reflect the true value of
Maxus.
39. While the Individual Defendants of Maxus should continue to seek
out other possible purchasers of the assets of Maxus or its stock in manner
designed to obtain the best transaction reasonably available for Maxus
shareholders, or seek to enhance the value of Maxus for all its current
shareholders, they have instead resolved to wrongfully allow YPF to obtain the
valuable assets of Maxus at an inadequate price, which disproportionately
benefits YPF.
40. These tactics pursued by the defendants are, and will continue to
be, wrongful, unfair and harmful to Maxus' public shareholders. These maneuvers
by the defendants will deny members of the Class their right to share
appropriately in the true value of Maxus' assets, future earnings and
businesses.
41. In contemplating, planning and/or effecting the foregoing
specified acts and in pursuing, timing and disclosing the Transaction,
defendants are not acting in good faith toward plaintiffs and the Class, and the
Individual Defendants have breached, and are breaching, their fiduciary duties
to plaintiffs and the Class.
42. Because the Individual Defendants (and those acting in concert
with them) dominate and control the business and corporate affairs of Maxus and
because they are in possession of private corporate information concerning
Maxus' businesses and future prospects, there exists an imbalance and disparity
of knowledge and economic power between the Individual Defendants
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and the public shareholders of Maxus which makes it inherently unfair to Maxus'
public shareholders.
43. By reason of the foregoing acts, practices and course of conduct,
the Individual Defendants have failed to use the required care and diligence in
the exercise of their fiduciary obligations owed to Maxus and their public
shareholders.
44. As a result of the actions of the defendants, plaintiffs and the
Class have been and will be damaged in that they will not receive the fair value
of Maxus' assets and business in exchange for their Maxus' shares, and have been
and will be prevented from obtaining a fair price for their shares of Maxus
common stock.
45. Unless enjoined by the Court, the Individual Defendants will
continue to breach their fiduciary duties owed to plaintiffs and the Class, all
to the irreparable harm of the Class.
46. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
(a) Declaring that this action may be maintained as a class action;
(b) Declaring that the proposed Transaction is unfair, unjust and
inequitable to plaintiffs and to other members of the Class;
(c) Enjoining preliminarily and permanently the defendants from taking
any steps necessary to accomplish or implement to proposed Transaction;
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(d) Undertake an appropriate evaluation of Maxus' worth as a
merger/acquisition candidate;
(e) Take all appropriate steps to enhance Maxus' value and
attractiveness as a merger/acquisition candidate;
(f) Take proper action to maximize the price that Maxus shareholders
will receive for their shares;
(g) Act independently so that the interests of Maxus' public
stockholders will be protected;
(h) Adequately ensure that no conflicts of interest exist between
Individual Defendants' own interest and their fiduciary obligation to maximize
stockholder value or, if such conflicts exist, to ensure that all conflicts are
resolved in the best interests of Maxus' public stockholders;
(i) Ordering the Individual Defendants to carry out their fiduciary
duties to plaintiffs and the class and requiring them to respond in good faith
to any bona fide potential acquirors of Maxus;
(j) Requiring supplemental disclosures;
(k) Requiring defendants to compensate plaintiffs and the members of
the Class for all losses and damages suffered and to be suffered by them as a
result of the acts and transactions complained of herein, together with
prejudgment and post-judgment interest;
(l) Awarding plaintiffs the costs and disbursements of this action,
including reasonable attorneys', accountants', and experts' fees; and
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(m) Granting such other and further relief as may be just and proper.
Dated: March 7, 1995 MORRIS AND MORRIS
By: /s/ Abraham Rappaport
----------------------------
Karen Morris
Abraham Rappaport
Patrick F. Morris
Suite 1600
1105 North Market Street
Post Office Box 2166
Wilmington, Delaware 19899-2166
OF COUNSEL:
Jules Brody
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
(212) 687-7230
Joseph H. Weiss
LAW OFFICES OF JOSEPH H. WEISS
319 Fifth Avenue
New York, NY 10016
(212) 532-4171
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Exhibit 10
[Letterhead of Mitchell, Kristl & Lieber]
March 15, 1995
VIA FACSIMILE (214) 979-1986
CERTIFIED MAIL AND U.S. MAIL
- ----------------------------
McCarter Middlebrook, Esq.
Vice President and General Counsel
Maxus Energy Corporation
717 North Harwood Street
Dallas, Texas 75201
Re: Derivative Demand
Dear Mr. Middlebrook:
We represent holders of shares of the $4.00 Cumulative Convertible
Preferred Stock and the $2.50 Cumulative Preferred Stock of Maxus Energy
Corporation. Some of these holders also own shares of the common stock of the
corporation. This letter hereby acts as the demand on the corporation to
commence suit on behalf of these stockholders against the directors and officers
of the corporation for the breach of their duties to the stockholders in the
proposed transaction with YPF Sociedad Anonima.
As a very initial matter, the holders of the stock object to the proposed
values to be paid for their shares. They consider the corporation to be worth
well in excess of the currently proposed offering values, even more so given the
recent press releases on new discoveries. Additionally, the holders of the
$4.00 and the $2.50 preferred stock strenuously object to the form of
consideration being paid to them. While all other holders of the company's
securities are being protected in the proposed transaction by the payment of
cash and other methods, the holders of preferred stock are being severely harmed
by this transaction.
The holders of preferred stock are not being paid cash for their interests.
Instead, they will receive illiquid shares in a company, which will be more
highly leveraged after the transaction. These shares in YPF Acquisition Corp.
will most likely not trade on any exchange or even be quoted in the National
Association of Securities Dealers, Inc. Automated Quotation System. As a result
of the directors and officers serving their own interests ahead of the
stockholders' interests,
<PAGE>
McCarter Middlebrook, Esq.
March 15, 1995
Page 2
the preferred stockholders will receive an illiquid investment, worth far less
than the present shares they now own.
We therefore demand that the corporation take any and all action necessary
to force the directors and officers to protect the interests of the preferred
stockholders in this transaction. If no action is taken, we will proceed in
equity and otherwise to protect the interests of the corporation and the
preferred stockholders in a derivative action, as well as all other legal
remedies available.
The preferred stockholders have requested that we demand your response by
March 20, 1995.
Very truly yours,
/s/ Janet L. Stafford
--------------------------------
Janet L. Stafford
For The Firm
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Exhibit 11
PRESS RELEASE
FOR IMMEDIATE RELEASE
- ---------------------
MAXUS ENERGY HAS 62 MMcf/D GAS DISCOVERY IN INDONESIA
- -----------------------------------------------------
DALLAS -- March 13, 1995 -- Maxus Energy Corporation (NYSE: MXS) today
announced the discovery of a gas well on its Northwest Java concession, offshore
Indonesia, that tested at a combined rate of 62 million cubic feet per day
(Mmcf/D) and 1,219 barrels of condensate from five zones.
The LES-1 well tested from perforations between 4,045 and 5,749 feet subsea in
the Main and Massive formations. The new discovery well, in the Java Sea about
50 miles northeast of Jakarta, reached a total depth of 7,583 feet subsea.
Maxus holds a 24% interest in the 5.1 million-area Northwest Java concession.
ARCO (NYSE: ARC), with a 46% interest, is project operator under a production-
sharing contract with Pertamina, the Indonesian state oil company.
In 1994, Northwest Java daily gross sales averaged 200 Mmcf of natural gas and
about 9,900 barrels of gas liquids. The Northwest Java Gas Project currently
supplies all of the gas to two government-owned electric utilities serving
Jakarta. The concession also produced 111,000 gross barrels of oil per day.
Dallas-based Maxus Energy Corporation is an independent oil and gas exploration
and production company.
<PAGE>
Exhibit 12
PRESS RELEASE
FOR IMMEDIATE RELEASE
- ---------------------
MAXUS ENERGY GIVES RESULTS FROM SOUTHEAST SUMATRA WELLS
- -------------------------------------------------------
DALLAS -- March 15, 1995 -- Maxus Southeast Sumatra, Inc., a subsidiary of Maxus
Energy Corporation (NYSE: MXS), today announced an oil discovery and the
results of two successful delineation wells that tested oil and natural gas from
Maxus' Southeast Sumatra concession, offshore Indonesia.
The Aida-1 oil discovery, located 1.5 kilometers southwest of the Widuri Field,
flowed 1,047 barrels per day (BOPD) of 34 degree API gravity oil at an initial
reservoir pressure of 1,431 pounds per square inch (psi) from a depth of 3,669
feet subsea. The discovery penetrated 56 feet of net oil pay in the fluvial
sandstones of the Talang Akiar Formation. The Aida-1 has a calculated
productivity index of 142 barrels of fluid per day/psi. A field development
plan is currently being proposed.
The delineation wells, Risma 2 and Risma 3, further evaluate the Risma 1
exploratory well that tested 4,527 BOPD and 9.6 million cubic feet per day of
gas (Mmcf/D). Risma 2, drilled about one kilometer southwest of Risma 1, tested
at a cumulative flow rate of 3,348 BOPD and 7.1 MMcf/D from four depths in the
Talang Akar Formation. The Risma 3, drilled directionally from Risma 2, tested
1,291 BOPD and 3.2 MMcf/D from five depths. The Risma 3 is about two kilometers
southeast of Risma 2. Both wells are being evaluated to determine justification
of further field development.
Maxus Southeast Sumatra has a 56% interest and operates the concession under a
production-sharing contract with Pertamina, the Indonesian state oil company.
Partners include Inpex, Repsol, Cieco, Deminex, Warrior and Oryx Energy.
Dallas-based Maxus Energy Corporation is an independent oil and gas exploration
and production company.
