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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9/A
(Amendment No. 1)
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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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Maxus Energy Corporation, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 717 North Harwood Street, Dallas, Texas 75201-6594. The class of
equity securities to which this Statement relates is the Common Stock, par value
$1.00 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer disclosed in a Schedule 14D-1,
dated March 3, 1995, by YPF Acquisition Corp., a Delaware corporation
("Purchaser"), 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 at a price of $5.50 per Share, net to the seller
in cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated March 3, 1995 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together, as amended
from time to time, constitute the "Offer"). The Offer is being made pursuant to
an Agreement of Merger, dated as of February 28, 1995 (the "Merger Agreement"),
among YPF, Purchaser, and the Company. See Item 3(b)(2) for a description of the
Merger Agreement.
The address of the principal executive offices of Purchaser is Avenida Pte.
Roque Saenz Pena 777, Buenos Aires 1364, Argentina.
ITEM 3. IDENTITY AND BACKGROUND
(a) Name and Address of the Company. The name and address of the Company,
which is the person filing this Statement, are set forth in Item 1 above.
(b)(1) Certain Contracts, Etc.. Certain contracts, agreements, arrangements,
or understandings between the Company or its affiliates and certain of its
directors and executive officers are described under the captions "Director
Compensation," "Termination of Employment and Change in Control Arrangements,"
and "Retirement Program" on pages 8, 10, 11, and 12 of the Company's Proxy
Statement, dated March 22, 1994, for its 1994 Annual Meeting of Stockholders
(the "1994 Annual Meeting Proxy Statement"). A copy of such portions of the 1994
Annual Meeting Proxy Statement is filed as Exhibit 1 hereto.
The Merger Agreement provides that the Company will cooperate with YPF and
Purchaser in an effort to obtain the surrender of all employee stock options and
similar rights (the "Options") in accordance with the provisions of Schedule 2.6
to the Merger Agreement, which schedule is based, in general, on the
Black-Scholes methodology for valuing options. If all Options are surrendered,
the holders thereof, including certain directors and executive officers of the
Company, will receive an aggregate amount of approximately $4.7 million. Of that
amount, Charles L. Blackburn, the Chairman, President and Chief Executive
Officer of the Company, the four next highest compensated executive officers of
the Company (collectively with Mr. Blackburn, the "Named Executives"), all
executive officers of the Company as a group (the "Executive Officer Group"),
and all directors of the Company as a group would receive approximately the
following amounts: Mr. Blackburn, $1,100,000; Mr. M.C. Forrest, $385,000; Mr.
S.G. Crowell, $390,000; Mr. G.W. Pasley, $335,000; Mr. M. Middlebrook, $160,000;
the Executive Officer Group, $2,900,000; and all directors of the Company (other
than Messrs. Blackburn and Forrest) as a group, $545,000. In addition, the
Merger Agreement provides that all restrictions on restricted Shares, which
include restricted Shares owned by certain executive officers of the Company,
will lapse at the Effective Time. The aggregate value of all restricted Shares,
based on a price per Share to be paid under the Merger, is approximately $5.2
million. Of that amount, the Named Executives and the Executive Officer Group
would receive the following amounts: Mr. Blackburn, $104,588; Mr. Forrest, $0;
Mr. Crowell, $34,430; Mr. Pasley, $20,658; Mr. Middlebrook, $14,916; and the
Executive Officer Group, $215,000.
The Merger Agreement provides that, except as may be expressly provided in a
valid written waiver voluntarily signed by an affected employee party thereto,
the Company will honor and, on and
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after the Effective Time, YPF will cause the Surviving Corporation to honor in
accordance with the terms thereof, without offset, deduction, counterclaim,
interruption, or deferment (other than withholdings under applicable law), all
employment, change-in-control, severance, termination, consulting, and unfunded
retirement or benefit agreements to which the Company or any of its subsidiaries
was a party as of February 28, 1995. The Company is presently a party to
change-in-control agreements with 17 senior executives of the Company, including
each of the executive officers of the Company, which agreements (or predecessors
thereof) were entered into in 1987 or, if later, the date that the executive
first attained the position of general manager or above. In the event that all
of the persons who are parties to change-in-control agreements terminate their
employment with the Company (or are terminated) under circumstances in which
they have rights to severance payments thereunder, the maximum aggregate amount
which the Company would be obligated to pay under all such agreements (assuming
such termination occurred on April 1, 1995) is estimated to be $14.7 million. Of
that amount, the Named Executives and the Executive Officer Group would receive
the following amounts: Mr. Blackburn, $2.7 million; Mr. Forrest, $1.0 million;
Mr. Crowell, $1.0 million; Mr. Pasley, $0.9 million; Mr. Middlebrook, $0.8
million; and the Executive Officer Group, $8.2 million.
The Merger Agreement also provides that, subject to Purchaser's purchase of
Shares pursuant to the Offer, the Company will, for a period of 12 months
following the Effective Time, continue, without amendment or change, except for
changes that increase such compensation or benefits or as may be required by
law, the Benefit Plans and the other compensation and benefit policies,
practices, programs, and arrangements (collectively, the "Plans"), which provide
compensation or benefits to employees of the Company and its subsidiaries,
except that the Surviving Corporation (as defined below) may replace any of the
Plans with another plan or program that provides not less than a substantially
equivalent level of compensation or benefits, and may amend or replace any Stock
Plan with another plan which is determined in good faith by the Board of
Directors of the Surviving Corporation to provide comparable incentive
compensation opportunities.
Prior to the Company's entry into the Merger Agreement, representatives of
YPF informed Mr. Blackburn that YPF expected Mr. Blackburn to resign his
positions as Chairman, President and Chief Executive Officer if YPF acquired the
Company, and on February 28, 1995, YPF announced that it had identified an
interim successor to Mr. Blackburn (Mr. Peter Gaffney, a founding partner of
Gaffney, Cline and Associates and a reservoir engineer who is currently
President of the Society of Petroleum Engineers). YPF has asked Mr. Blackburn to
become an international consultant to YPF and to remain a director of the
Company following the merger contemplated by the Merger Agreement (the
"Merger"). If Mr. Blackburn accepts YPF's offer, he would be paid an annual
retainer of $500,000, have offices in Dallas and Buenos Aires, be expected to
spend 50-75% of his time working for YPF, and have direct access to YPF's Chief
Executive and Chief Operating Officers. The term of the proposed consulting
arrangement is two years. Although Mr. Blackburn has informally indicated that
he is willing to entertain this proposal, Mr. Blackburn has informed YPF that he
will not formally respond thereto until after the completion (or termination) of
the Offer.
The Prudential Preferred Waiver Agreement. In accordance with the provisions
of the Company's Restated Certificate of Incorporation (the "Certificate"), The
Prudential Insurance Company of America ("Prudential"), which is the current
holder of all of the outstanding shares of the Company's $9.75 Cumulative
Convertible Preferred Stock, par value $1.00 per share (the "$9.75 Preferred
Stock"), must approve the Merger in order for the Merger to be consummated. On
February 28, 1995, the Company and Prudential entered into an agreement (the
"Prudential Preferred Waiver Agreement"), a copy of which is filed as Exhibit 2
hereto, pursuant to which Prudential agreed to consent to the Merger and,
effective upon the Effective Time of the Merger, to (i) waive certain rights,
including appraisal rights, conversion rights, rights under the Rights Agreement
(as defined below), and the right to receive increased dividends under certain
circumstances, (ii) waive certain covenants restricting the Company's ability to
take certain actions, and (iii) terminate the registration rights associated
with the $9.75 Preferred Stock. Pursuant to the Prudential Preferred Waiver
Agreement, the Company has agreed, effective as of the Effective Time of the
Merger, to (a) waive certain rights, including the right
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to redeem the $9.75 Preferred Stock at its option and the right of first offer
with respect to the transfer of the shares of $9.75 Preferred Stock, and (b) pay
to Prudential a restructuring fee of $250,000 at the Effective Time of the
Merger. To induce Prudential to enter into the Prudential Preferred Waiver
Agreement, YPF also agreed, effective as of the Effective Time of the Merger,
among other things, to guarantee the payment and performance of each and every
obligation of the Company to the registered owners of $9.75 Preferred Stock.
(b)(2) The Merger Agreement. The following is a summary of the material
provisions of the Merger Agreement, a copy of which is filed as Exhibit 3
hereto. For purposes of this Item 3(b)(2), except as set forth herein with
respect to certain terms the meaning of which is not readily apparent,
capitalized terms used and not otherwise defined herein have the meanings given
to such terms in the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer.
The obligation of Purchaser to accept for payment Shares tendered pursuant to
the Offer is subject to the satisfaction of a number of conditions set forth on
Exhibit A to the Merger Agreement, including without limitation (i) the closing
of the financings described in Item 8 hereof (the "Financing Condition"), (ii)
the taking by the Company of all steps necessary to redeem certain rights (the
"Rights") issued pursuant to a Rights Agreement, dated September 8, 1988 (the
"Rights Agreement"), between the Company and AmeriTrust Company National
Association, as Rights Agent, attached to Shares at a redemption price of $0.10
per Right so that such Rights will not become exercisable as a result of the
consummation of the transactions contemplated by the Merger Agreement, and (iii)
that the number of Shares being validly tendered and not withdrawn prior to the
expiration date provided in the Offer, when added to the Shares and $4.00
Cumulative Convertible Preferred Stock, par value $1.00 per share, of the
Company (the "$4.00 Preferred Stock" and, together with the Shares, the "Voting
Stock") beneficially owned by YPF and Purchaser, represents not less than a
majority of the Voting Stock outstanding on a fully diluted basis (the "Minimum
Share Condition"). Any condition other than the Minimum Share Condition may be
waived by Purchaser in its sole discretion. Pursuant to the Merger Agreement,
Purchaser reserved the right to increase the price per Share payable in the
Offer or to otherwise amend the Offer, except that Purchaser may make no
amendment that decreases the price per Share payable in the Offer, reduces the
minimum number of Shares to be purchased in the Offer, imposes additional
conditions to the Offer, or makes any other change in the terms and conditions
of the Offer that is materially adverse to the holders of the Shares. In the
event the Merger Agreement is terminated pursuant to its terms, YPF and
Purchaser have agreed that, without the consent of the Board of Directors of the
Company (the "Board"), neither they nor their affiliates will acquire or seek to
acquire shares of Voting Stock of the Company other than pursuant to the Offer
or the Merger for a period of not less than 24 months following such
termination.
The Merger. The Merger Agreement provides that, unless the Merger Agreement
is terminated or abandoned (see "Termination" in this Item 3), as soon as
practicable following fulfillment or waiver of the conditions described in this
Item 3 under "Conditions to the Merger," at the Effective Time, Purchaser will
be merged with and into the Company, whereupon the separate existence of
Purchaser will cease and the Company will be the surviving corporation in the
Merger (as such, the "Surviving Corporation"). The Merger Agreement further
provides that (i) the Certificate and the By-Laws of the Company as in effect at
the Effective Time will be the certificate of incorporation and the by-laws of
the Surviving Corporation, (ii) the directors of Purchaser immediately prior to
the Effective Time will be the directors of the Surviving Corporation, and (iii)
the officers of the Company immediately prior to the Effective Time will be the
officers of the Surviving Corporation.
Consideration to be Paid in the Merger. The Merger Agreement provides that
each Share outstanding immediately prior to the Effective Time (other than
Shares held in the treasury of the Company, Shares owned by YPF, Purchaser, or
any other direct or indirect subsidiary of YPF, and Shares held by stockholders
that perfect their appraisal rights under the Delaware General Corporation Law
(the "DGCL")) will, at the Effective Time, be cancelled and retired and be
converted into a right
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to receive in cash an amount per Share equal to the highest price per Share paid
by Purchaser pursuant to the Offer, without interest, upon the surrender of the
certificate which prior to the Effective Time represented such Shares, and each
Share held in the treasury of the Company and each Share held by YPF, Purchaser,
or any other direct or indirect subsidiary of YPF immediately prior to the
Effective Time will, at the Effective Time, be cancelled and retired and no
payment will be made with respect thereto. Each share of common stock of
Purchaser issued and outstanding immediately prior to the Effective Time will,
at the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and become one share of common
stock of the Surviving Corporation, and each outstanding share of $4.00
Preferred Stock, $9.75 Preferred Stock, and $2.50 Cumulative Preferred Stock,
par value $1.00 per share (the "$2.50 Preferred Stock"), of the Company
(collectively, the "Preferred Stock") will remain outstanding and have, as to
the Surviving Corporation, the identical powers, preferences, rights,
qualifications, limitations, and restrictions as such shares of Preferred Stock
presently have, except as agreed to by the holder of the $9.75 Preferred Stock
(see Item 3(b)(1) above).
Employee Benefits and Stock Awards. See "Certain Contracts, Etc." in Item
3(b)(1) above for a discussion of certain provisions of the Merger Agreement
relating to employee benefits and stock awards.
Stockholders' Meeting. In the Merger Agreement, the Company has agreed to
take all action necessary in accordance with applicable law and the Certificate
and its By-Laws to convene a meeting of its stockholders as promptly as
reasonably practicable after the date of the Merger Agreement to consider and
vote upon the adoption of the Merger Agreement, if such stockholder approval is
required by applicable law. Nothing in the Merger Agreement affects the right of
Purchaser to take action by written consent in lieu of a meeting or otherwise to
the extent permitted by applicable law. At any such meeting, all Voting Stock
then owned by YPF, Purchaser, or any other direct or indirect subsidiary of YPF
will be voted in favor of adoption of the Merger Agreement. Subject to its
fiduciary duties under applicable law, the Board has resolved to recommend that
the Company's stockholders approve adoption of the Merger Agreement, if such
stockholder approval is required.
Representations and Warranties. The Merger Agreement also contains various
customary representations and warranties by the Company relating to, among other
things, (i) the organization of the Company and its subsidiaries and other
corporate matters, (ii) the capital structure of the Company, (iii) the
authorization, execution, delivery, and consummation of the transactions
contemplated by the Merger Agreement, (iv) consents and approvals, (v) documents
filed by the Company with the Securities and Exchange Commission (the
"Commission") and the accuracy of the information contained therein, (vi) the
absence of certain changes and events, (vii) the accuracy of the information
contained in documents filed with the Commission in connection with the Offer
and the Merger, (viii) litigation, (ix) compliance with laws and certain
environmental matters, (x) tax, insurance, and labor matters, and (xi) matters
relating to Title IV of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder. The Company has
also represented in the Merger Agreement that it will take the necessary steps
to redeem, on or prior to March 23, 1995, all of the outstanding Rights issued
pursuant to the Rights Agreement in accordance with the terms of the Rights
Agreement and applicable law.
The Merger Agreement contains certain similar representations and warranties
by YPF and Purchaser concerning (i) the organization of YPF and Purchaser and
other corporate matters, (ii) the authorization, execution, delivery, and
consummation of the transactions contemplated by the Merger Agreement, (iii) the
accuracy of the information contained in documents filed with the Commission in
connection with the Offer and the Merger, and (iv) the financing of the Offer
and the Merger. YPF has also represented and warranted that, based on its review
of the Company's financial condition, operations, and business plan, the
representations made by the Company in the Merger Agreement, the financial
condition of YPF and its subsidiaries, and Purchaser's plans with respect to the
Company and its subsidiaries, YPF has no reason to believe that following the
Merger and financings contemplated in
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respect thereof the Company will not be able to meet its obligations as they
become due, including, solely for purposes of this representation and warranty,
preferred stock dividend and mandatory redemption payments. As described below
under "Certain Additional YPF Obligations," YPF has, under certain circumstances
and subject to certain limitations, agreed to capitalize the Company in respect
of such obligations.
Board Representation. The Merger Agreement provides that, upon Purchaser's
acquisition of a majority of the outstanding shares of Voting Stock pursuant to
the Offer, and from time to time thereafter so long as YPF and/or any of its
direct or indirect wholly owned subsidiaries (including Purchaser) owns a
majority of the outstanding shares of Voting Stock, YPF will be entitled,
subject to compliance with applicable law, the Certificate, and the provisions
described in the next sentence, to designate at its option up to that number of
directors, rounded up to the nearest whole number, of the Company as will make
the percentage of the Company's directors designated by YPF equal to the
percentage of outstanding shares of Voting Stock held by YPF and any of its
direct or indirect wholly owned subsidiaries (including Purchaser), including
Shares accepted for payment pursuant to the Offer. The Company has agreed that
it will, upon the request of YPF, promptly increase the size of its Board and/or
use its reasonable best efforts to secure the resignation of such number of
directors as is necessary to enable YPF's designees to be elected to the Board
and will use its reasonable best efforts to cause YPF's designees to be so
elected, subject to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), except that, prior to the Effective Time, the
Company will use its reasonable best efforts to assure that the Board always has
(at its election) at least three members who were directors of the Company as of
February 28, 1995. At such times, the Company will use its reasonable best
efforts, subject to any limitations imposed by law or the rules of the New York
Stock Exchange (the "NYSE"), to cause persons designated by YPF to constitute
the same percentage as such persons represent on the Board of (i) each committee
of the Board, (ii) each board of directors or board of management of each
subsidiary of the Company, and (iii) each committee of each such board.
Agreements with Respect to the Conduct of Business. The Merger Agreement
provides that, except as specifically contemplated by the Merger Agreement or as
otherwise approved by YPF in writing, during the period from the date of the
Merger Agreement to the earlier of the time that the designees of YPF have been
elected to, and constitute a majority of, the Board or the Effective Time, the
Company will, and will cause each of its subsidiaries to, conduct their
respective businesses only in, and not take any action except in, the ordinary
and usual course of business substantially consistent with past practice, and
use reasonable efforts to preserve intact the business organization of the
Company and each of its subsidiaries, to keep available the services of its and
their present officers and key employees, and to preserve the goodwill of those
having business relationships with the Company or its subsidiaries. In addition,
subject to certain exceptions, during such period, the Company will not, and
will not permit any of its subsidiaries to, (i) make or propose any change or
amendment to their respective certificates of incorporation or by-laws (or
comparable governing documents), except as may be required by law; (ii)
authorize for issuance, issue, sell, or deliver any capital stock or any other
securities of any of them (other than pursuant to the Options, Options and
Converts, the $4.00 Preferred Stock, the $9.75 Preferred Stock, or the 401(k)
Plan, or the issuance of Shares issued under the terms of the Director Plan in a
manner consistent with any such plan or past practice), or issue any securities
convertible into or exchangeable for, or options, warrants to purchase, scrip,
rights to subscribe for, calls, or commitments of any character whatsoever
relating to, or enter into any contract with respect to the issuance of, any
shares of capital stock or any other securities of any of them (other than
pursuant to the Options, Options and Converts, the $4.00 Preferred Stock, the
$9.75 Preferred Stock, the 401(k) Plan (or in connection with the 401(k) Plan or
the Director Plan as aforesaid)), purchase, or otherwise acquire or enter into
any contract with respect to the purchase or voting of shares of their capital
stock, or adjust, split, combine, or reclassify any of their capital stock or
other securities, or make any other changes in their capital structures; (iii)
declare, set aside, pay, or make any dividend or other distribution or payment
(whether in cash, stock, or property) with respect to, or purchase or redeem,
any shares of the capital stock of any of them other than (a) regular quarterly
cash dividends on
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the Preferred Stock, (b) dividends, distributions, or payments paid by its
subsidiaries to the Company or its subsidiaries with respect to their capital
stock, (c) the Rights in accordance with the Rights Agreement, and (d) loans and
payments from the Company to any of its subsidiaries or from any of such
subsidiaries to the Company or another such subsidiary; (iv) except in limited
circumstances, prior to the Effective Time, adopt or amend any bonus, profit
sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, welfare benefit plan, change-in-control
agreement, restricted stock, performance unit, employment, or other employee
benefit agreements, trusts, plans, funds, or other arrangements for the benefit
or welfare of any director, officer, or employee, or (except, other than with
respect to employees at the Company's Pay Grade 12 or above, for normal
increases in the ordinary course of business that are consistent with past
practice and that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company or pursuant to collective
bargaining agreements or other contracts presently in effect) increase in any
manner the compensation or fringe benefits of any director or officer or pay any
benefit not required by any existing plan, arrangement, or contract (including
without limitation the granting of stock options, stock appreciation rights,
shares of restricted stock, or performance units) or take any action or grant
any benefit not expressly required under the terms of any existing contracts,
trusts, plans, funds, or other such arrangements or enter into any contract to
do any of the foregoing; or (v) except in the ordinary course of business, (a)
incur or assume any indebtedness, (b) assume, guarantee, endorse, or otherwise
become liable (whether directly, contingently, or otherwise) for the obligation
of any other Person except in the ordinary course of business and consistent
with past practice, or (c) make any loans, advances, or capital contributions
to, or investments (other than intercompany accounts and short-term investments
pursuant to customary cash management systems of the Company in the ordinary
course and consistent with past practice) in, any other Person other than such
of the foregoing as are made by the Company to or in a wholly owned subsidiary
of the Company.
Conditions to the Merger. The Merger is conditioned upon the satisfaction of
certain conditions including (i) adoption of the Merger Agreement by the
requisite vote of holders of Voting Stock, (ii) acceptance by the Purchaser for
payment of Shares pursuant to the Offer, (iii) the absence of certain orders,
injunctions, or actions which prevent or materially restrict consummation of the
Merger or that would make the acquisition or holding by YPF or its subsidiaries
of the Shares or shares of common stock of the Surviving Corporation illegal,
and (iv) expiration or termination of applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. In addition,
the obligations of YPF and Purchaser to consummate the Merger are conditioned
upon the satisfaction of certain conditions, including (i) compliance by the
Company in all material respects with each of its covenants under the Merger
Agreement, (ii) the accuracy in all material respects as of the Closing Date of
the representations and warranties of the Company, and (iii) the Financing
Condition.
No Solicitation, Etc. The Merger Agreement provides that neither the Company
nor any of its subsidiaries will, directly or indirectly (and each will instruct
or otherwise use its reasonable best efforts to cause its affiliates that are
controlled by the Company and the officers, directors, employees, agents, or
advisors or other representatives or consultants of the Company not to),
encourage, solicit, initiate, engage in, or participate in discussions or
negotiations with, or provide information to, any Person (other than YPF,
Purchaser, or subsidiaries, affiliates, or representatives of any of the
foregoing) in connection with any tender offer, exchange offer, merger,
consolidation, business combination, sale of substantial assets, sale of
securities, liquidation, dissolution, or similar transaction involving the
Company or any of its subsidiaries or divisions (including without limitation
Midgard Energy Company ("Midgard")). Notwithstanding the foregoing, the Company
may do any of the foregoing if outside counsel to the Company advises the Board
that any action is required for the Company's directors to satisfy their
fiduciary duties under applicable law. The Company will promptly (i) notify YPF
in the event of any discussion, negotiation, proposal, or offer, or any decision
to furnish information or take any other action referred to above in this
paragraph, and (ii) furnish YPF copies of all such written information furnished
to any Person to the extent not previously furnished to YPF.
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Indemnification of Directors and Others. Pursuant to the Merger Agreement,
for a period of seven years following the Effective Time, YPF will cause the
Surviving Corporation to indemnify, defend, and hold harmless the present and
former officers, directors, employees, and agents of the Company and its
subsidiaries (each an "Indemnified Party") against all losses, claims, damages,
or liabilities arising out of actions or omissions occurring on, prior to, or
after the Effective Time to the full extent provided under Delaware law, the
Certificate, and By-Laws of the Company in effect on the date of the Merger
Agreement, or any agreement in effect at the date of the Merger Agreement,
except that any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under Delaware
law, the Certificate, or By-Laws of the Company, or under any such agreement
will be made by independent counsel selected by the Indemnified Party and
reasonably satisfactory to the Surviving Corporation. The Surviving Corporation
will maintain the Company's existing officers' and directors' liability
insurance ("D&O Insurance") in full force and effect without reduction of
coverage for a period of seven years after the Effective Time, except that (i)
the Surviving Corporation will not be required to pay an annual premium therefor
in excess of 250% of the last annual premium paid prior to the date of the
Merger Agreement (the "Current Premium") and (ii) if the existing D&O Insurance
expires, is terminated, or is cancelled during such seven-year period, the
Surviving Corporation will use its best efforts to obtain as much D&O Insurance
as can be obtained for the remainder of such period for a premium on an
annualized basis not in excess of 250% of the Current Premium.
Certain Additional YPF Obligations. The Merger Agreement provides that
whenever it requires Purchaser to take any action, such requirements will be
deemed to include an undertaking on the part of YPF to cause Purchaser to take
such action.
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 purposes of this covenant dividend and redemption payments
with respect to the Preferred Stock, YPF has agreed for a period of nine years
following the Effective Time to capitalize the Company in an amount necessary to
permit the Company to meet such obligations (the "Keepwell Covenant"). This
obligation (i) is limited to the amount of debt service obligations under the
Purchaser Facility (as described in Item 8 hereof) and, to the extent the
Purchaser Facility is replaced by the Midgard Loan and/or the Subsidiaries Loan
(as described in Item 8 hereof), the amount of debt service obligations under
the Midgard Loan and/or the Subsidiaries Loan, and (ii) will be reduced by the
amount of any capital contributions received by the Company after the Effective
Time and the net proceeds of any sale by the Company of common stock or
non-redeemable preferred stock after the Effective Time.
Subject to certain limitations, YPF and the Company have agreed to use
reasonable efforts to continue the listing on the NYSE of the shares of
Preferred Stock which are currently listed on the NYSE or, if delisted, to cause
such shares of Preferred Stock to be listed on another national securities
exchange or admitted for trading on the National Association of Securities
Dealers Automated Quotation System and on other organized securities markets in
such foreign jurisdictions in which such shares are presently traded, subject to
certain limitations.
Termination. According to its terms, the Merger Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval by the stockholders of the Company, (i) by the mutual
consent of the Boards of Directors of YPF, Purchaser, and the Company; (ii) by
YPF and Purchaser, on the one hand, or the Company, on the other hand, if the
Offer expires or is terminated or withdrawn in accordance with the terms of the
Merger Agreement without any Shares being purchased thereunder or the Offer is
terminated, or has not been commenced by the close of business on March 7, 1995,
or if Purchaser has not purchased Shares validly tendered and not withdrawn
pursuant to the Offer in accordance with the terms of the Merger Agreement
within 75 calendar days after commencement of the Offer, provided, however, that
the party seeking to terminate the Merger Agreement is not in material breach
thereof; (iii) by the Company, if YPF or Purchaser materially breaches any of
the representations and warranties or covenants contained in the
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Merger Agreement, or by YPF and Purchaser if the Company materially breaches any
of the representations and warranties or covenants contained in the Merger
Agreement; (iv) by either YPF and Purchaser or the Company, if the Merger is not
consummated prior to June 30, 1995, provided, however, that the right to
terminate the Merger Agreement pursuant to this provision will not be available
to any party whose failure to fulfill any obligation under the Merger Agreement
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date; (v) by either YPF and Purchaser, on the one hand,
or the Company, on the other hand, if either one (or any permitted assignee
under the Merger Agreement) is restrained, enjoined, or otherwise precluded by
an order, decree, ruling, or injunction (other than an order or injunction
issued on a temporary or preliminary basis) of a court, domestic or foreign, of
competent jurisdiction, governmental authority, or other regulatory or
administrative agency or commission, from consummating the Merger or making the
acquisition or holding by YPF or its subsidiaries of the Shares or shares of
common stock of the Surviving Corporation illegal and all means of appeal and
all appeals from such order decree, ruling, injunction, or other action have
been finally exhausted; (vi) by the Company if the Board determines that it will
not recommend acceptance of the Offer and approval of the Merger by the
Company's stockholders (or if such recommendation is withdrawn) based upon the
advice of outside counsel that such action is necessary for the Board to comply
with its fiduciary duties to stockholders under applicable law; and (vii) by YPF
and Purchaser, if (a) the Board shall not have recommended or shall withdraw,
modify, or change its recommendation relating to the Merger or the Offer in a
manner materially adverse to YPF or shall have resolved to do any of the
foregoing; (b) the Board recommends to the stockholders of the Company that they
accept or approve, or the Company or any of its subsidiaries shall have agreed
to engage in, a Competing Transaction (as defined below); or (c) any Person
shall have acquired beneficial ownership or the right to acquire beneficial
ownership or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder) shall have
been formed which beneficially owns, or has the right to acquire "beneficial
ownership" (as defined in the Rights Agreement) of, more than 20% of the
then-outstanding Shares. "Competing Transaction" is defined in the Merger
Agreement as any of the following involving the Company or any of its
subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction except for such of the foregoing in
which the only parties are the Company or one or more subsidiaries of the
Company; (ii) any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition of the assets of the Company or any of its subsidiaries constituting
5% or more of the consolidated assets of the Company or accounting for 5% or
more of the consolidated revenues of the Company in a single transaction or
series of related transactions involving any Person other than the Company or
one or more subsidiaries of the Company; or (iii) any tender or exchange offer
for 20% or more of the outstanding Voting Stock or the filing of a registration
statement under the Securities Act of 1933, as amended, in connection therewith.
In the event of any termination and abandonment pursuant to the Merger
Agreement, no party to the Merger Agreement (or any of its directors or
officers) will have any liability or further obligation to any other party to
the Merger Agreement, except for certain express obligations under the Merger
Agreement and except that no party will be relieved from liability for any
breach of the Merger Agreement. Any action by the Company to terminate the
Merger Agreement as described herein will require only the approval of a
majority of the directors of the Company then in office who were directors of
the Company on the date of the Merger Agreement, or persons nominated or elected
to succeed such directors by a majority of such directors.
In the event the Merger Agreement is terminated by the Company as provided
therein, (i) YPF and the Purchaser will not, and will cause their subsidiaries
and affiliates controlled by them not to, acquire or offer to acquire or request
permission to acquire or offer to acquire (either directly or pursuant to a
waiver of this or any other covenant in the Merger Agreement) Shares otherwise
than pursuant to the Offer or the Merger for a period of not less than 24 months
after termination of the Merger Agreement without prior written approval of the
Board and (ii) the provisions of a confidentiality agreement previously entered
into between the Company and YPF will continue to apply.
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Termination Fees; Expenses. Whether or not the Offer or Merger is
consummated, all costs and expenses incurred in connection with the Offer, the
Merger Agreement, and the transactions contemplated thereby will be paid by the
party incurring such costs and expenses, provided, however, that the Company
must promptly pay $20 million to Purchaser in the event of a termination of the
Merger Agreement (i) by the Company if the Board determines that it will not
recommend acceptance of the Offer and adoption of the Merger Agreement by the
Company's stockholders (or if such recommendation is withdrawn) based upon the
advice of outside counsel that such action is necessary for the Company's
directors to comply with their fiduciary duties to stockholders under applicable
law; (ii) by YPF and Purchaser if the Board shall not have recommended or shall
withdraw, modify, or change its recommendation relating to the Merger or the
Offer in a manner materially adverse to YPF; or (iii) by YPF and Purchaser if
the Board recommends to the stockholders of the Company that they accept or
approve, or the Company or any of its subsidiaries agree to engage in, a
Competing Transaction.
The Merger Agreement also provides that YPF and Purchaser, jointly and
severally, must promptly pay $20 million to the Company in the event of a
termination of the Merger Agreement by the Company or YPF if, at the date of
such termination, any condition to the funding of the YPF Facility or the
Purchaser Facility has not been satisfied, provided that at such time no other
condition to YPF's obligation to consummate the Offer or the Merger is
unsatisfied (other than the failure to meet the Minimum Share Condition as a
result of the failure to obtain such funding).
Waiver and Amendment. Subject to applicable law, any provision of the Merger
Agreement may be waived at any time by the party which is, or whose stockholders
are, entitled to the benefits thereof, and the Merger Agreement may be amended
or supplemented at any time, provided that no amendment may be made after any
stockholder approval of the adoption of the Merger Agreement that reduces the
price to be paid per Share pursuant to Merger, without further approval of the
holders of the Voting Stock.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Board Recommendation. On February 28, 1995, the Board, by unanimous vote
(with the director elected by Prudential pursuant to the terms of the $9.75
Preferred Stock abstaining) (i) determined that the Offer and Merger were in the
best interest of the Company and the stockholders of the Company, (ii) approved
the Merger Agreement, the Offer, and the Merger, and determined that such
approval satisfied the requirements of Section 203(a)(1) of the DGCL, rendering
the special stockholder vote requirements of such Section inapplicable to the
Merger Agreement, the Offer, and the Merger, (iii) subject to the fiduciary
duties of the Board, resolved to recommend acceptance of the Offer by holders of
Shares and adoption of the Merger Agreement by holders of shares of Voting
Stock, and (iv) approved certain other actions to be undertaken pursuant to the
terms of the Merger Agreement, including redemption of the Rights by the Company
at the redemption price of $0.10 per Right. A joint press release announcing the
Offer and the other transactions pursuant to the Merger Agreement and the
Company's letter to stockholders with respect thereto are filed as Exhibits 4
and 5 hereto, respectively.
(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
the last half of 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.
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One of the alternatives given serious consideration was a public offering of
the Company's mid-continent gas production and processing operations, later to
be named "Midgard." 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. At the time of the filing (the "Initial Filing"),
Midgard estimated that the offering, together with an expected subsequent
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. With the assistance of CS First Boston
Corporation ("CSFB"), the Company's financial advisor, commencing in the latter
part of 1994, the Company also solicited offers for the private sale of a
minority interest in Midgard. A substantial number of possible financial and
strategic investors were contacted during this process. 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 possible public offerings of
Midgard equity and debt securities (together, the "Midgard Offering
Alternative"). The Midgard Offering Alternative continued to be pursued and 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, the Company
agreed 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 the late Autumn of 1994, the Company was contacted by a possible
strategic buyer ("Company I") that indicated that it desired to initiate
substantive discussions relating to the possible acquisition of the entire
equity interest in the Company. A confidentiality agreement with Company I was
signed in November 1994 and during the next several months the Company, with the
assistance of CSFB, furnished to Company I extensive information relating to the
Company's business, financial condition, results of operations, and prospects.
This extensive due diligence included site visitations to the Company's
principal worldwide locations. However, on January 27, 1995, Company I informed
the Company that it was no longer interested in pursuing the possible
acquisition of the entire equity interest in the Company, but rather that it
desired to pursue the possible acquisition of Midgard and/or the Company's
Indonesian subsidiaries.
In early December of 1994, Mr. Blackburn met with YPF's Chief Executive
Officer to discuss a wide variety of possible transactions, including the
possible purchase by YPF of a substantial equity interest in the Company. The
companies signed a confidentiality agreement and YPF and its representatives
undertook an extensive due diligence review of the Company.
In mid-January 1995, CSFB, on behalf of the Company, 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. None of the potential financial or
strategic investors expressed an interest in pursuing the acquisition of a
minority interest in Midgard, although a number of possible strategic buyers
expressed an interest in acquiring the entire equity interest in, or
substantially all of the assets of, Midgard (the "Midgard Disposition
Alternative"). At a meeting of the Board on January 31, 1995, the alternatives
then available to the Company, none of which was believed by management of the
Company to be acceptable due to the terms and conditional nature thereof, were
reviewed. While no decision had been made with respect to the course of action
to be taken, the Board instructed the Company's management at the January 31,
1995 meeting to continue to explore all reasonable alternatives, following which
CSFB, on behalf of the Company, requested what were determined to be the best
potential bidders in respect of the Midgard Disposition Alternative to submit
proposals by February 21, 1995. In addition, CSFB requested that YPF (Company I
having previously informed CSFB and the Company that it was no longer interested
in acquiring the entire equity interest in the Company) consider increasing its
prior proposal for the possible acquisition of all of the Shares at $5.00 per
Share in cash and also still consider a substantial equity investment in the
Company.
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On February 21, 1995, the Company received indications of interest in
respect of the Midgard Disposition Alternative. The indication of interest
judged most favorable to the Company by management (the "Final Midgard
Alternative") was from Company I. 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 in connection with the redemption of
the Rights.
At a meeting of the Board held on February 26, 1995, the Board carefully
considered the Final Midgard Alternative, the Midgard Offering Alternative, and
the YPF Alternative. At that meeting, the Board received presentations from
management of the Company, CSFB, and the Company's legal advisors, in respect of
the various alternatives available to the Company, the terms of the Final
Midgard Alternative and the YPF Alternative and then-unresolved issues relating
thereto, 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. However, 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 instruct management of the Company to engage in further
negotiations with YPF in an effort to resolve various points arising under the
YPF Alternative.
At a meeting of the Board held on February 28, 1995, the Company again
considered the alternatives then available to the Company. At the meeting, the
Board heard presentations from management of the Company, CSFB, and the
Company's legal advisors as to various matters, including the negotiations that
had been held with representatives of YPF with respect to the points still open
in the YPF Alternative at the time of the February 26, 1995 Board meeting,
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, and a presentation by CSFB of its
views as to the fairness of the YPF Alternative to holders of Shares (discussed
in the following paragraph), 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 various assumptions, including without limitation
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.
It was the consensus of the Board that the Company should elect either the
Final Midgard 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 Final Midgard 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
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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 any condition to such financing is not
satisfied.
(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 described above 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 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED
The Company retained CSFB to act as exclusive financial advisor to the
Company with respect to the matters referred to in Item 4 hereof. Pursuant to
the terms of the engagement letter, dated January 23, 1995, the Company agreed
to pay CSFB (i) in the event of sale of all or substantially all of the Shares
in connection with the sale of the Company, 0.45% of the total enterprise value
of the Company, as determined pursuant to the engagement letter, or (ii) in the
event of any other sale of an equity interest in the Company other than a sale
of the Company, an amount equal to 1.9% to 2.15% of the aggregate consideration
received. If the Offer and Merger are consummated in accordance with the terms
thereof, it is estimated that CSFB will be entitled to receive approximately $8
million. Under the January 23, 1995 engagement letter, the Company will also
reimburse CSFB for its reasonable out-of-pocket expenses, including all fees and
disbursements of counsel and other advisors retained by CSFB. In addition, the
Company has agreed to indemnify CSFB and certain related persons against certain
liabilities in connection with CSFB's engagement.
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Pursuant to an engagement letter dated January 23, 1995, the Company agreed
(i) to pay to CSFB, in the event of the sale of all, substantially all, or a
minority interest in Midgard, an amount equal to 1.75% to 2.50% of the aggregate
consideration received in a private sale up to a maximum of $5 million, or (ii)
to give CSFB, in the event of the sale of equity or debt securities in the
public market, the right to act as lead manager and receive customary
underwriting fees.
CSFB has from time to time for a period of more than five years provided
financial advisory services to the Company and has received fees for the
rendering of such services . CSFB has informed the Company that an officer of
CSFB is an alternate member of the Board of YPF and that CSFB has from time to
time provided investment banking services to YPF. In addition, CSFB has informed
the Company that in the ordinary course of CSFB's business, it and its
affiliates may actively trade in the debt and equity securities of the Company
and its affiliates for CSFB's own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
As of February 28, 1995, CSFB held 34,625 Shares in discretionary and
proprietary trading accounts.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained, or compensated any person to make solicitations
or recommendations to the Company's stockholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Share Transactions in Last 60 Days. There have been no transactions in
Shares which were effected during the past 60 days by the Company, or, to the
knowledge of the Company, any executive officer, director, affiliate, or
subsidiary of the Company, except for transactions effected in the Company's
401(k) employee savings plan in accordance with the terms thereof and consistent
with past practice.
In addition, pursuant to the Director Stock Purchase Plan (the "Director
Plan"), each of the non-employee directors of the Company, as a portion of their
director's compensation for 1994, is entitled to that number of Shares having a
fair market value (as determined under the Director Plan) equal to $6,800 on the
date of acquisition. It is anticipated that such directors will acquire such
Shares in accordance with the terms of the Director Plan after the consummation
or termination of the Offer.
(b) Intent to Tender. To the knowledge of the Company, (i) all of its
executive officers, directors, affiliates, or subsidiaries presently intend to
tender Shares to Purchaser pursuant to the Offer and (ii) none of its executive
officers, directors, affiliates, or subsidiaries presently intends to otherwise
sell any Shares which are owned beneficially or held of record by such persons.
The foregoing does not include any Shares over which, or with respect to which,
any such executive officer, director, affiliate, or subsidiary acts in a
fiduciary or representative capacity or is subject to instructions from a third
party, as to which Shares, to the Company's knowledge, no determination has been
made.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Certain Negotiations. Except as referred to in Item 3(b) or Item 4
hereof, as of the date hereof, no negotiation is being undertaken or is underway
by the Company in response to the Offer which relates to or would result in (i)
an extraordinary transaction such as a merger or reorganization involving the
Company or any subsidiary of the Company; (ii) a purchase, sale, or transfer of
a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company. Pursuant to the Merger Agreement, however, and as
described under "No Solicitation, Etc." in Item 3(b)(2) above, the Company may,
subject to certain limitations, take certain actions in respect of proposed
transactions if in the opinion of outside counsel the taking of
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such actions is necessary for the directors of the Company to discharge their
fiduciary obligations under applicable law.
(b) Certain Transactions. Except as described in Item 3(b), there are no
transactions, board resolutions, agreements in principle, or signed contracts
which relate to or would result in one or more of the matters referred to in
Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
(a) YPF Financing. The following information regarding the financing of the
Offer and Merger has been provided by YPF and Purchaser. The total amount of
funds required by Purchaser to purchase all outstanding Shares and to pay
related fees and expenses is estimated to be approximately $800 million. The
funds necessary to purchase Shares pursuant to the Offer and to pay related fees
and expenses will be furnished to Purchaser (i) by YPF as a capital
contribution, and (ii) through the financings described below.
YPF has received a commitment letter (the "Commitment Letter") from The
Chase Manhattan Bank (National Association) ("Chase") pursuant to which Chase
has agreed to provide four credit facilities aggregating up to $800,000,000: (i)
a $200,000,000 credit facility to be extended to YPF (the "YPF Facility"), (ii)
a credit facility of up to $600,000,000 to be extended to Purchaser (the
"Purchaser Facility"), (iii) a credit facility of up to $250,000,000 to be
extended to Midgard (the "Midgard Facility"), and (iv) a credit facility of up
to $250,000,000 to be extended to certain other subsidiaries of the Company as
described below (the "Subsidiaries Facility"). The proceeds of the Midgard
Facility and the Subsidiaries Facility will be used to repay, in part, the
Purchaser Facility. Chase has confirmed that it is willing to provide the entire
amount of these four facilities. Chase also has advised YPF that it intends to
arrange one or more syndicates of commercial banks, financial institutions, and
other investors to provide a portion of these facilities (Chase together with
such other banks, institutions, and investors, if any, are collectively referred
to as the "Lenders") and that it proposes to act as the agent for the Lenders in
connection with each of the facilities.
YPF Facility. The YPF Facility will be made in a single loan (the "YPF
Loan") on or before the funding date of the Purchaser Loan described below and
mature on the earlier of: (i) November 5, 1995 and (ii) the date that is seven
months from the date of its funding (such earlier date being the "YPF Maturity
Date"). At YPF's option, the interest rate applicable to the YPF Loan will be
the one-, two-, or three-month London Interbank Offered Rate plus 1%. The YPF
Loan will be repaid in three consecutive monthly installments: (i) $50,000,000
to be paid two months prior to the YPF Maturity Date, (ii) $75,000,000 to be
paid one month prior to the YPF Maturity Date, and (iii) $75,000,000 to be paid
on the YPF Maturity Date. It is anticipated that the YPF Loan will be repaid
with funds generated by YPF's business operations, including crude oil export
revenues.
Purchaser Facility. The Purchaser Facility will be made available in not
more than two advances (collectively, the "Purchaser Loan"), and mature on the
earlier of: (i) the date that is 90 days after the expiration of the Tender
Offer (the "Tender Offer Closing Date"), and (ii) July 5, 1995 (such earlier
date being the "Purchaser Maturity Date"). At Purchaser's option, the interest
rate applicable to the Purchaser Loan will be (i) the one month London Interbank
Offered Rate plus a margin of (a) 1 3/4% until the date 60 days after the Tender
Offer Closing Date, and (b) 2 1/2% thereafter on that portion of the aggregate
outstanding principal amount of the Purchaser Loan equal to or less than
$500,000,000 and 3 1/2% on the aggregate outstanding principal amount of the
Purchaser Loan in excess of $500,000,000, or (ii) Chase's base rate plus a
margin of (a) 3/4% until the date 60 days after the Tender Offer Closing Date,
and (b) 1 1/2% thereafter on that portion of the aggregate outstanding principal
amount of the Purchaser Loan that is equal to or less than $500,000,000 and 2
1/2% on the aggregate outstanding principal amount of the Purchaser Loan in
excess of $500,000,000. The Purchaser Loan will be guaranteed by YPF as
described below. In addition, prior to the Merger, the Purchaser Loan will
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be secured by a pledge by Purchaser of all of the Shares purchased pursuant to
the Offer, or if such pledge is not permissible under the Federal Reserve
Board's Margin Regulations, Purchaser will agree not to dispose of any such
Shares except for cash at fair market value. The Lenders' obligation to fund the
Purchaser Loan is subject to certain conditions as described below. It is
anticipated that up to $100,000,000 of the Purchaser Loan will be repaid on or
before the Purchaser Maturity Date from cash of the Company.
Midgard Facility. YPF currently anticipates that, on or before the Purchaser
Maturity Date, up to $250,000,000 of the Purchaser Loan will be repaid with
funds provided to the Company by Midgard. Midgard will provide the funds from
the proceeds of a loan of up to $250,000,000 (the "Midgard Loan") to be extended
by the Lenders pursuant to the Midgard Facility. The Midgard Loan will be made
in a single drawing, will mature on the date that is seven years after the date
the initial Purchaser Loan is funded (the "Purchaser Initial Funding Date"), and
will be repaid in up to 20 consecutive quarterly installments commencing on the
date (the "Amortization Date") that is two years after the Purchaser Initial
Funding Date. At Midgard's option, the interest rate applicable to the Midgard
Loan will be (i) the one-, two-, or three-month London Interbank Offered Rate
plus a margin of (a) 1 3/8% until the Amortization Date, and (b) 1 7/8%
thereafter until maturity, or (ii) Chase's base rate plus a margin of (a) 3/8%
until the Amortization Date, and (b) 7/8% thereafter until maturity. The Midgard
Loan will not be secured but will be guaranteed by YPF and the Company. The
agreement evidencing the Midgard Loan (the "Midgard Loan Agreement") will
contain, among other things, a negative pledge on all assets of Midgard. The
Lenders' obligation to fund the Midgard Loan is subject to certain conditions as
described below. It is anticipated that the Midgard Loan will be repaid with
funds generated by Midgard's business operations.
Subsidiaries Facility. YPF currently anticipates that on or before the
Purchaser Maturity Date, up to $250,000,000 of the Purchaser Loan will be repaid
with funds provided to the Company by Natomas Energy Company ("Natomas"), Maxus
Northwest Java, Inc. ("Java"), and Maxus Southeast Sumatra, Inc. ("Sumatra")
(collectively, the "Designated Subsidiaries"). The Designated Subsidiaries will
provide these funds from the proceeds of a loan of up to $250,000,000 (the
"Subsidiaries Loan") made to them by the Lenders pursuant to the Subsidiaries
Facility. The Subsidiaries Loan will be made in a single drawing on the
Purchaser Maturity Date, will mature on the date that is six years after the
Purchaser Initial Funding Date and will be repaid in up to 16 consecutive
quarterly installments commencing on the Amortization Date. At the option of the
Designated Subsidiaries, the interest rates applicable to the Subsidiaries Loan
will be (i) the one-, two-, or three-month London Interbank Offered Rate plus a
margin of (a) 1 3/4% until the Amortization Date, and (b) 2 1/4% thereafter
until maturity, or (ii) Chase's base rate plus a margin of (a) 3/4% until the
Amortization Date, and (b) 1 1/4% thereafter until maturity. The Subsidiaries
Loan will be guaranteed by YPF and the Company and will be secured by certain
intangible assets and rights to payment of Java and Sumatra arising out of their
respective operations in Indonesia. The agreement evidencing the Subsidiaries
Loan (the "Subsidiaries Loan Agreement") will contain a negative pledge on all
of the other assets of the Designated Subsidiaries. The Lenders' obligation to
fund the Subsidiaries Loan is subject to certain conditions as described below.
It is anticipated that the Subsidiaries Loan will be repaid with funds generated
by the Designated Subsidiaries' business operations. Upon further review of the
value of the assets of Midgard and the Designated Subsidiaries, the terms of the
Midgard Loan and the Subsidiaries Loan may be modified to provide for
intercompany guarantees or other arrangements whereby Midgard and the Designated
Subsidiaries provide support for each other's loans.
Conditions to Funding. The obligation of the Lenders to provide the YPF
Facility, the Purchaser Facility, the Midgard Facility and the Subsidiaries
Facility is subject to the fulfillment of certain conditions, including without
limitation, (i) the absence of any material adverse change in the condition
(financial or otherwise), business operations, assets, nature of assets or
liabilities of (a) YPF and its subsidiaries (taken as a whole), (b) the Company
and its subsidiaries (taken as a whole), or (c) Midgard, Natomas, Java, and
Sumatra, (ii) the receipt by Purchaser of at least $200,000,000 from the
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issuance of its common stock or a capital contribution from its immediate parent
or both, (iii) approval by the Board of the Offer and the Merger and
recommendation that the Company's stockholders tender their Shares, (iv) the
Lenders' satisfaction that $800,000,000 is sufficient to (and does not exceed
the amount required to) consummate the Merger and to pay all related commissions
and expenses, and (v) the Lenders' satisfaction that the Company will have
sufficient cash available to pay the lesser of (a) $100,000,000, and (b) the
difference between (1) the principal amount of the Purchaser Loan outstanding on
the Purchaser Maturity Date, and (2) the lesser of $500,000,000 or such other
amount as is available under the Commitment Letter for the Midgard Loan and
Subsidiaries Loan as described above.
The obligation of the Lenders to fund the Midgard Loan and the Subsidiaries
Loan will be subject to certain additional conditions, including without
limitation, (i) the effectiveness of the Merger, (ii) the absence of any
material adverse change in the condition (financial or otherwise), business,
operations, assets, nature of assets or liabilities of (a) YPF and its
subsidiaries (taken as a whole), (b) the Company and its subsidiaries (taken as
a whole), and (c) Midgard, Natomas, Java, or Sumatra, (iii) the payment in full
of the Purchaser Loan, and (iv) all indebtedness and other obligations of each
of Midgard, Natomas, Java, and Sumatra to the Company and its other subsidiaries
shall have been paid in full or satisfactorily subordinated to the repayment of
the Midgard Loan and the Subsidiaries Loan.
Prepayment. Each of the YPF Loan, the Purchaser Loan, the Midgard Loan, and
the Subsidiaries Loan (collectively, the "Loans") may be prepaid in whole or in
part without premium or penalty, except for costs associated with the prepayment
of any portion of a Loan bearing interest at a rate determined by reference to
the London Interbank Offered Rate prior to the end of any applicable interest
period.
YPF Guarantee. YPF will guarantee the repayment of the Purchaser Facility,
the Midgard Facility, and the Subsidiaries Facility. The YPF guarantee of the
Purchaser Facility may be secured, prior to the Merger, by a pledge of the
Purchaser's shares, and after the Merger by a pledge of the Company's shares.
The guarantee will also contain certain covenants, including a limitation on
YPF's debt level and a required level of tangible net worth.
Keepwell Covenant. See "Certain Additional YPF Obligations" in Item 3(b)(2)
above for a description of YPF's Keepwell Covenant under the Merger Agreement.
(b) Certain Litigation. The Company has obtained copies of nine complaints
filed on March 1, 1995 in the Chancery Court of the State of Delaware by alleged
holders of Shares. In the various complaints, the plaintiffs purport to sue
individually and on behalf of classes comprised of the holders of Shares,
stockholders of the Company, or all holders of the Company's securities. The
complaints name as defendants the Company, the directors and certain of the
officers of the Company, a former director of the Company, and/or, with respect
to some of the complaints, YPF and allege, among other things, that the
defendant directors and officers of the Company breached their fiduciary duties
in approving the Offer and the Merger and that with respect to those complaints
naming YPF as a defendant, YPF assisted and aided and abetted the alleged breach
of duties. The plaintiffs purport to seek orders enjoining the consummation of
the Offer and the Merger (or the rescission of those transactions) or, in the
alternative, accountings for any damages to the alleged classes, together with
their attorneys' fees and other relief. The defendants intend to vigorously
defend these lawsuits. The absence of an injunction, among other things, is a
condition to Purchaser's obligation to purchase Shares tendered pursuant to the
Offer. See "Termination" in Item 3(b)(2) above.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 1+ --Information under the captions "Director Compensation," "Termination of
Employment and Change-in-Control Arrangements," and "Retirement Program" of
the Company's Proxy Statement, dated March 22, 1994, for its 1994 Annual
Meeting of Stockholders.
Exhibit 2+ --Prudential Preferred Waiver Agreement.
Exhibit 3+ --Merger Agreement.
Exhibit 4+ --Press Release issued on February 28, 1995.
Exhibit 5+* --Letter to Stockholders of the Company, dated March 3, 1995.
Exhibit 6+* --Opinion of CSFB, dated February 28, 1995.
</TABLE>
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+ Previously filed.
* 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: /s/ MCCARTER MIDDLEBROOK
__________________________________
McCarter Middlebrook
Vice President and General Counsel
Dated: March 6, 1995
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