<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
KEY PRODUCTION COMPANY, INC.
---------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_]$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1)Title of each class of securities to which transaction applies:
(2)Aggregate number of securities to which transaction applies:
(3)Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4)Proposed maximum aggregate value of transaction:
(5)Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1)Amount Previously Paid:
(2)Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4)Date Filed:
Notes:
<PAGE>
---------------------
KEY
---------------------
PRODUCTION
COMPANY, INC.
---------------------
SUITE 2050 ONE NORWEST CENTER
1700 LINCOLN STREET
DENVER, COLORADO 80203-4520
April 28, 1995
TO OUR STOCKHOLDERS:
You are cordially invited to attend the annual meeting of stockholders of
Key Production Company, Inc., to be held on Thursday, June 8, 1995, at the
University Club, 1673 Sherman Street, Denver, Colorado.
Stockholders will vote upon the election of directors and will consider and
act upon any other business which properly comes before the meeting.
Management will also give a brief report on the operations and direction of
the Company. I hope you will be able to attend.
Whether or not you plan to attend the meeting, please be sure to sign, date
and return your proxy card at your earliest convenience.
[SIGNATURE OF F. H. MERELLI APPEARS HERE]
F. H. Merelli
Chairman, President and Chief
Executive Officer
<PAGE>
---------------------
KEY
---------------------
PRODUCTION
COMPANY, INC.
---------------------
SUITE 2050 ONE NORWEST CENTER
1700 LINCOLN STREET
DENVER, COLORADO 80203-4520
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------
April 28, 1995
TO THE STOCKHOLDERS OF KEY PRODUCTION COMPANY, INC.:
The annual meeting of stockholders of Key Production Company, Inc., a
Delaware corporation, will be held on Thursday, June 8, 1995, at 2:00 p.m.
local time at the University Club, 1673 Sherman Street, Denver, Colorado for
the following purposes:
1. To elect three directors; and
2. To transact any other business which properly comes before the
meeting or any adjournment thereof.
All stockholders of record on the Company's transfer books as of the close
of business on April 12, 1995, are entitled to vote at the meeting. A complete
list of stockholders entitled to vote at the annual meeting will be available
for examination by any Company stockholder at the Company's principal
executive offices located at 1700 Lincoln Street, 20th floor, Denver, Colorado
for purposes relevant to the annual meeting, during normal business hours for
a period of ten days prior to the annual meeting.
Please read the attached proxy statement carefully. PLEASE SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD AUTHORIZING REPRESENTATIVES OF THE
COMPANY'S MANAGEMENT TO VOTE ON YOUR BEHALF AT THE MEETING.
By order of the Board of Directors
KEY PRODUCTION COMPANY, INC.
[SIGNATURE OF MONROE W. ROBERTSON
APPEARS HERE]
Monroe W. Robertson
Senior Vice President and Secretary
<PAGE>
---------------------
KEY
---------------------
PRODUCTION
COMPANY, INC.
---------------------
SUITE 2050 ONE NORWEST CENTER
1700 LINCOLN STREET
DENVER, COLORADO 80203-4520
--------
PROXY STATEMENT
--------
April 28, 1995
This proxy statement and accompanying proxy card support a proxy
solicitation on behalf of the board of directors of Key Production Company,
Inc. (Key or the Company) for use at the June 8, 1995, annual meeting of
stockholders and at any adjournment of that meeting. This proxy statement and
form of proxy will be sent to stockholders beginning approximately April 28,
1995.
The proxy card, when properly signed, dated and returned to the Company,
will be voted by the proxies at the annual meeting as directed. Proxy cards
returned without direction about business to be transacted at the meeting will
be voted in favor of the nominees for director proposed by management and the
proxies will use their best judgement regarding other matters that properly
come before the meeting. The Company is not aware of any matters, other than
those discussed in this proxy statement, that will be presented at the
meeting.
The Company can conduct business at the meeting only if holders of a
majority of the total outstanding shares of common stock entitled to vote are
present, either in person or by proxy. The election of directors at the
meeting shall be determined by plurality vote. The Company's principal
executive offices are located at 1700 Lincoln Street, Suite 2050, Denver,
Colorado.
REVOCABILITY OF PROXY
Any stockholder giving a proxy may revoke it at any time prior to the
meeting either through submission of a later-dated proxy or by providing
notice of revocation to the corporate secretary of the Company at the address
set forth above. Stockholders may vote all their eligible shares if they are
personally present at the meeting. When a stockholder votes at the meeting,
his or her vote will revoke any proxy previously granted by the stockholder.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of April 12, 1995, the record date, 9,171,999 shares of the Company's
$.25 par value common stock were outstanding and entitled to vote at the
meeting. Each share entitles the holder thereof to cast one vote for each
director to be elected; votes that are withheld will be excluded from the vote
and will have no effect. Each
<PAGE>
share also entitles the holder thereof to cast one vote on each separate
matter of business properly brought before the meeting. Abstentions will be
counted toward the tabulation of votes cast on the proposals presented and
will have the same effect as a negative vote. Broker non-votes are counted
toward a quorum, but are not counted for purposes of determining approval of a
matter, except on proposals to amend the Company's Certificate of
Incorporation, in which case a broker non-vote will have the same practical
effect as a negative vote. Only stockholders of record at the close of
business on April 12, 1995, may vote. Stockholders are not allowed to cumulate
votes in the election of directors.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows the identity of beneficial owners known to the
Company to own five percent or more of the Company's common stock as of April
12, 1995. This information is based upon filings made by such persons with the
Securities and Exchange Commission or upon information provided to the
Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF CLASS
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
------------------- -------------------- ----------------
<S> <C> <C>
Apache Corporation 711,015 7.75%
One Post Oak Central
2000 Post Oak Blvd.
Suite 100
Houston, Texas 77056-4400
Elliott Associates, L.P. 820,599 8.95%
712 5th Avenue
36th Floor
New York, New York 10019
</TABLE>
Francis H. Merelli, Chairman, President and Chief Executive Officer of
the Company, holds 7.64% of the common stock outstanding (see
"Securities Ownership of Management" below).
SECURITIES OWNERSHIP OF MANAGEMENT
The following table provides information as of April 12, 1995, regarding
the Company's common stock beneficially owned by each director and nominee for
director, the Chief Executive Officer and each other executive officer whose
aggregate base salary and bonus for fiscal 1994 exceeded $100,000 (the Named
Executive Officer) and by all directors and executive officers as a group.
Except as noted, each beneficial owner has the sole voting and investment
power for the shares shown opposite his name.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF CLASS
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP* OUTSTANDING*
------------------------ ------------------------ ----------------
<S> <C> <C>
Francis H. Merelli 738,552 (/1/)(/4/) 7.64%
Cortlandt S. Dietler 75,000 (/2/) 0.81%
Timothy J. Moylan 88,100 (/2/) 0.96%
Monroe W. Robertson 173,552 (/3/)(/4/) 1.86%
All directors and executive
officers
as a group (including the
above named persons) 1,237,652 (/5/) 12.26%
</TABLE>
- ----------
*Calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934.
(/1/)Includes 151,000 shares held in Mr. Merelli's IRA account and options for
500,000 shares, one-third of which vested September 1, 1993, one-third of
which vested September 1, 1994, with an additional one-third vesting on
the next anniversary date.
2
<PAGE>
(/2/)Includes options for 45,000 shares of common stock, one-third of which
vested December 9, 1993, one-third of which vested December 9, 1994, with
an additional one-third vesting on the next anniversary date.
(/3/)Includes options for 150,000 shares of common stock, one-third of which
vested January 4, 1994, one-third of which vested January 4, 1995, with
an additional one-third vesting on the next anniversary date.
(/4/)Includes 17,552 shares held by Messrs. Merelli and Robertson as Trustees
of the Company's 401(k) retirement plan.
(/5/)Includes options for 920,000 shares of common stock, vesting at various
dates beginning September 1, 1993.
ELECTION OF DIRECTORS
(ITEM NO. 1 ON THE PROXY CARD)
The Company's bylaws provide that the board of directors shall consist of a
minimum of three and a maximum of twelve directors. The board of directors has
fixed the number of directors at three. Unless directors resign earlier or are
removed, their terms are for one year, and continue thereafter until their
successors are elected and qualify as directors. The three directors to be
elected at this annual meeting of stockholders will serve commencing upon
their election and qualification until the annual meeting of stockholders in
1996. Stockholders may not vote for a greater number of directors than the
number nominated by the board of directors.
The present term of all directors, each of whom were elected June 9, 1994,
expires at the 1995 annual meeting or at such time as their successors are
elected and qualified. Each director has been nominated by the board of
directors for election for an additional one-year term. Unless otherwise
instructed, the proxies will be voted in favor of these nominees. If one or
more of the nominees is unwilling or unable to serve, the proxies will be
voted for the election of another person or persons as the proxies, in their
discretion, deem appropriate. The proxies cannot be voted for more than three
directors. The board of directors knows of no proposed nominee for director
who is unwilling or unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NOMINEE.
INFORMATION ABOUT NOMINEES FOR ELECTION AS DIRECTORS
Certain biographical information, including principal occupation and
business experience during the last five years, about each nominee for
director is set forth below.
FRANCIS H. MERELLI, 59, has been chairman of the board of directors,
president and chief executive officer of the Company since September 9, 1992.
From July 1991 to September 1992, Mr. Merelli was engaged as a private
consultant in the oil and gas industry. Mr. Merelli was president and chief
operating officer of Apache Corporation, and president, chief operating
officer and a director of Key from June 1988 to July 1991, at which time he
resigned from those positions in both companies. He was president of Terra
Resources, Inc. from 1979 to 1988.
CORTLANDT S. DIETLER, 73, is an advisory director of Panhandle Eastern
Corporation. He was chairman of the board and chief executive officer of
Associated Natural Gas Corporation from January 1987 and December 1985,
respectively, and chairman of the board and chief executive officer of that
company's principal operating subsidiary, Associated Natural Gas, Inc., from
December 1986 and January 1989, respectively. Effective March 1995, Mr.
Dietler resigned from each position with Associated Natural Gas Corporation
and its subsidiaries.
TIMOTHY J. MOYLAN, 38, has been the president and chief executive officer
of BelRad Group, Inc., successor to Mainline Enertech, since 1986. He served
as chief executive officer and president of Natural Resources Group, Inc. from
1983 to 1990. He is a director of Energy West Corporation.
3
<PAGE>
INFORMATION ABOUT STANDING COMMITTEES OF
THE BOARD OF DIRECTORS AND MEETINGS
The board of directors has an audit committee. The audit committee members
are Cortlandt S. Dietler and Timothy J. Moylan. The audit committee reviews
the Company's independent auditors' audit and review programs and procedures
and the scope and results of their examinations. It also examines professional
services provided by the auditors and evaluates audit costs and related fees.
Additionally, the audit committee reviews the financial statements and the
adequacy of the Company's system of internal accounting controls. The audit
committee makes recommendations to the board of directors relating to the
independent auditors and to their engagement or discharge.
The board of directors has established a compensation committee for the
purpose of determining compensation for executive officers of the Company.
During fiscal year 1994, the compensation committee was comprised of Cortlandt
S. Dietler and Timothy J. Moylan.
One meeting of the board of directors and one meeting of the audit and
compensation committees were held during 1994. Other board action throughout
the year was accomplished by written consent. Each incumbent director attended
all board meetings and all meetings of committees on which he was a member.
INFORMATION ABOUT EXECUTIVE
OFFICERS OF THE COMPANY
Certain biographical information concerning the executive officers of the
Company is set forth below. Biographical information concerning Francis H.
Merelli may be found under the caption "Information About Nominees For
Election As Directors."
MONROE W. ROBERTSON, 45, has been with the Company since September 10,
1992. Since February 1994, he has served as senior vice president and
corporate secretary and prior to that time as vice president and corporate
secretary. From August 1988 to July 1992, he was employed by Apache
Corporation in various capacities, the most recent of which was director of
operational planning. From 1986 to 1988, Mr. Robertson was director of
corporate planning for Terra Resources, Inc. From 1973 to 1986, Mr. Robertson
was employed by Gulf Oil Corporation.
CATHY L. ANDERSON, 39, has been controller of the Company since January 15,
1993. From July 1985 to January 1993, Ms. Anderson was employed by Arthur
Andersen & Co., a public accounting firm, in various capacities, the most
recent of which was audit manager.
STEPHEN P. BELL, 40, has been vice president--land of the Company since
February 2, 1994. From March 1991 to February 1994, he was president of
Concord Reserve, Inc., a privately-held independent oil and gas company. He
was employed by Pacific Enterprises Oil Company (formerly Terra Resources,
Inc.) as mid-continent regional manager from February 1990 to February 1991
and as land manager from August 1985 to January 1990.
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation earned in
1994, 1993 and 1992 by the Chief Executive Officer and the Named Executive
Officer of the Company. Prior to September 1992, management of the Company
consisted of individuals associated with Apache Corporation.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
-------------- ---------------
SECURITIES
UNDERLYING ALL OTHER
NAME OF INDIVIDUAL AND POSITION FISCAL YEAR SALARY(/1/) OPTIONS AWARDED COMPENSATION
- ------------------------------- ----------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Francis H. Merelli,
Chairman, 1994 $150,000 -- $ 9,645 (/3/)
President and Chief 1993 $150,000 -- $ 8,732 (/3/)
Executive Officer 1992 $ 50,000 (/2/) 500,000 $ 2,000 (/3/)
Monroe W. Robertson, 1994 $115,000 -- $ 4,662 (/3/)
Senior Vice President
and 1993 $115,000 150,000 $ 4,600 (/3/)
Corporate Secretary 1992 $ 38,333 (/2/) -- $ 1,533 (/3/)
</TABLE>
- ----------
(/1/)Includes amounts earned but deferred at the election of the officer.
(/2/)Salary paid from September 1, 1992, to December 31, 1992.
(/3/)Includes the Company's matching contribution pursuant to the Company's
401(k) plan in which all employees are eligible to participate and the
one-year term cost of life insurance provided for the Chief Executive
Officer.
AGGREGATED OPTION EXERCISES
IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-
MONEY
NUMBER OF UNEXERCISED OPTIONS AT
NUMBER OF OPTIONS AT FISCAL YEAR FISCAL YEAR
SHARES END END(/3/)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Francis H. Merelli -- -- 333,334 166,666 (/1/) $541,668 $270,832
Monroe W. Robertson -- -- 50,000 100,000 (/2/) $106,250 $212,500
</TABLE>
- ----------
(/1/)Options were granted September 1, 1992, and vest at a rate of one-third
per year over three years. These options were not granted under the
Company's 1992 Stock Option Plan.
(/2/)Options were granted on January 4, 1993, and vest at a rate of one-third
per year over three years. These options were granted under the Company's
1992 Stock Option Plan.
(/3/)Amount represents the closing price of the Company's common stock at
December 30, 1994, on The NASDAQ Stock Market, less the exercise price
multiplied by the number of exercisable/unexercisable stock options at
December 31, 1994, that had an exercise price less than the market value
at that date.
DIRECTOR COMPENSATION
The Company's current non-employee directors receive no compensation for
their affiliation with the Company other than the stock options granted under
the 1992 Stock Option Plan for Non-Employee Directors. Both Messrs. Dietler and
Moylan were granted stock options for 45,000 shares on December 9, 1992, at an
exercise price of $2.875 per share. One-third of these options vested on
December 9, 1993, one-third vested on December 9, 1994, and the additional one-
third will vest on the next anniversary date. The directors are also reimbursed
for out-of-pocket expenses relating to their attendance at board of director
meetings.
5
<PAGE>
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company entered into an employment agreement with Mr. Merelli pursuant
to which he has agreed to serve in his present capacity for an indefinite
term. The employment agreement provides that Mr. Merelli shall receive a base
annual salary of $150,000. The base salary may be increased (but not
decreased) by the compensation committee of the board of directors.
In addition to the base salary, the employment agreement provides for the
grant to Mr. Merelli of a stock option covering 500,000 shares of the
Company's common stock and also provides that Mr. Merelli shall be eligible
for incentive bonuses under any incentive program for executives of the
Company which is adopted by the board of directors. No such incentive bonus
program has been adopted as of the date of this proxy statement.
The employment agreement further provides that in the event of termination
of his employment by the Company without cause or by reason of death or
disability, Mr. Merelli or his estate shall receive his then current monthly
salary for a period of twenty-four months. The Company is also obligated to
maintain insurance on the life of Mr. Merelli in the amount of $500,000. The
stock option agreement with Mr. Merelli provides that upon a change in control
of the Company, all of Mr. Merelli's outstanding options will be immediately
vested. Mr. Merelli is a participant in the Key Production Company, Inc.
Income Continuance Plan which provides for the continuation of salary and
benefits for certain employees in the event of a change in control of the
Company. Any benefits paid to Mr. Merelli pursuant to this plan would be in
lieu of and not in addition to any payments pursuant to his employment
agreement.
The Company entered into an employment agreement with Monroe W. Robertson
in which he has agreed to serve in his present capacity for an indefinite
term. The agreement provides that Mr. Robertson shall receive a base annual
salary of $115,000. The base salary may be increased (but not decreased) by
the compensation committee of the board of directors. Mr. Robertson is also
eligible to receive incentive bonuses under any incentive program for
executives of the Company which may be adopted by the board of directors.
The agreement also provides that if Mr. Robertson's employment is
terminated without cause or by reason of his death or disability, Mr.
Robertson or his estate shall receive his then current monthly salary for a
period of twenty-four months. The stock option agreement with Mr. Robertson
provides that upon a change in control of the Company, all of Mr. Robertson's
outstanding options will be immediately vested. Mr. Robertson is a participant
in the Key Production Company, Inc. Income Continuance Plan which provides for
the continuation of salary and benefits for certain employees in the event of
a change in control of the Company. Any benefits paid to Mr. Robertson
pursuant to this plan would be in lieu of and not in addition to any payments
pursuant to his employment agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither Mr. Moylan nor Mr. Dietler, the members of the compensation
committee, was at any time during fiscal year 1994 or any preceding fiscal
year an officer or employee of the Company or any of its subsidiaries. During
fiscal year 1994, no executive officer of Key served as a director or member
of a compensation (or similarly empowered) committee for any entity whose
executive officer or officers served on Key's compensation committee.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation committee is composed of its outside, non-
employee directors. The compensation committee considers and establishes
compensation guidelines and administers the Company's 1992 Stock Option Plan.
It also specifically sets salary and benefit levels for senior management,
including the Chief Executive Officer and the Named Executive Officer, subject
to the terms of existing employment
6
<PAGE>
agreements. The Company's compensation committee has furnished the following
report on the Company's executive compensation policies and programs for
inclusion in this proxy statement:
The overall policy of the Company's executive compensation program is to
attract, retain and reward executives who are capable of leading the Company
in achieving its business objectives in a competitive industry. The executive
compensation program consists primarily of base salary and stock options,
although executives also receive benefits typically offered to corporate
executives.
In keeping with this overall policy, the compensation committee emphasizes
the grant of equity interests in the Company. In this way, overall
compensation is directly related to the performance of the Company and its
stock price through the grant of stock options and other performance based
compensation, rather than high base salaries.
In making decisions regarding base salaries during 1994, the committee
examined data from a survey prepared by a reputable consulting organization.
The companies analyzed in the survey consisted of approximately 40 companies
engaged in the oil and gas industry. The committee reviewed the compensation
and benefits of executives who hold positions of similar overall
responsibility for those companies included in the survey which most closely
approximated the size of the Company. Based on this data, the base salaries of
executives of the Company are at or below the median level for companies of
comparable size engaged in similar business. This result is in keeping with
the Committee's philosophy that the non-variable portion of any executive
officer's pay should be relatively modest.
In 1994, one senior officer of the Company was granted stock options under
the Company's 1992 Stock Option Plan in accordance with the stated philosophy
of the compensation committee. The committee believes this grant will aid in
its objective of aligning the officer's interest with those of the
stockholders by continuing to give the officers a direct stake in the
performance of the Company. All stock options granted under the 1992 Plan have
an exercise price equal to the fair market value of the Company's common stock
on the grant date and vest over three years. Options granted to executives
benefit the executive only if shareholders also benefit from appreciating
stock prices.
The executive officers participate in the Company's 401(k) retirement
savings plan, which consists of employee contributions and the Company's
matching contribution of up to four percent of the employee's base salary. In
1994, the committee approved adoption of the Key Production Company, Inc.
Income Continuance Plan which provides for the continuation of salary and
benefits for certain employees in the event of a change in control of the
Company. Any payments made pursuant to this plan are in lieu of and not in
addition to any payments made pursuant to employment agreements. Under the
Company's non-qualified Deferred Compensation Plan, certain executive officers
are entitled to defer an amount of income equal to the amount they would have
been able to contribute to the Company's 401(k) plan, but are prohibited from
doing so under Section 402(g) of the Internal Revenue Code of 1986.
Participants may also elect to have up to 25 percent of their annual
compensation and 75 percent of any bonus withheld and credited to the plan.
Mr. Merelli was hired in late 1992 as the Chairman, Chief Executive Officer
and President of the Company. Since that time, the strategic direction of the
Company has significantly changed under his leadership. The annual
compensation paid to Mr. Merelli in 1994 consisted primarily of base salary.
No stock option awards were granted and no increase was made to his base
salary in 1994. The compensation committee believes that Mr. Merelli's base
salary is conservative for the Chairman of the Board, President and Chief
Executive Officer for a corporation of the Company's size, being significantly
below the median levels of the relevant survey group. The committee prefers to
maintain this position and emphasize compensation elements sensitive to
Company performance. In the view of the committee, Mr. Merelli's
accomplishments will contribute significantly to long-term value.
Respectfully submitted,
Cortlandt S. Dietler
Timothy J. Moylan
7
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on Key
Production Company, Inc. common stock, over a five-year period commencing
December 31, 1989, to that of Standard & Poor's 500 Stock Index and the Dow
Jones Secondary Oil Stock Index. The information is included for historical
comparative purposes only and should not be considered indicative of future
stock performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(/1/)
AMONG KEY PRODUCTION COMPANY, INC., THE S & P 500 INDEX
AND THE DOW JONES SECONDARY OIL INDEX
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
KPCI 100 120 139 106 122 196
S&P 500 100 97 126 136 150 152
DJ 2D OIL 100 83 82 82 91 88
</TABLE>
[GRAPH APPEARS HERE]
- ----------
(/1/)$100 invested on December 31, 1989, in stock or index, including
reinvestment of dividends. Fiscal year ending December 31.
TRANSACTIONS WITH AFFILIATES
During 1994, Key entered into three transactions with Apache Corporation,
which is the beneficial owner of more than five percent of the Company's
common stock. In July, 1994, Key exchanged approximately 200,000 net
undeveloped acres in the Green River Basin of Wyoming for 800,000 shares of
Key's common stock held by Apache. Later in July, 1994, Key purchased 200,000
shares of its common stock from Apache at a price of $4.50 per share and in
December, 1994, Key purchased an additional 91,000 shares from Apache at $4.75
per share.
8
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP (formerly known as Arthur Andersen & Co.) has served as
the Company's independent accountants since 1988, the year of the Company's
incorporation, and has been selected to continue in that capacity in 1995. A
representative of Arthur Andersen LLP will be present at the annual meeting
and will have an opportunity to make a statement if he desires to do so and
will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. If a stockholder wishes to have a proposal appear in the Company's
proxy statement for next year's annual meeting, under the regulations of the
Securities and Exchange Commission, it must be received by the corporate
secretary (at Suite 2050, One Norwest Center, 1700 Lincoln Street, Denver,
Colorado 80203-4520) on or before December 31 , 1995.
EXPENSE AND MANNER OF SOLICITATION
In addition to solicitation by mail, proxies may be solicited in person or
by telephone by directors, officers, and regular employees of the Company who
will not receive compensation for their soliciting activities. Brokers and
other nominees will solicit proxies or authorizations from beneficial owners
and will be reimbursed for their reasonable expenses. The Company has retained
Corporate Investor Communications, Inc. to assist in soliciting proxies from
brokers, bank nominees and other institutional holders for a fee not to exceed
$3,750 plus expenses. The Company will bear all of the costs of the
solicitation.
OTHER BUSINESS
All items of business to be brought before the meeting are set forth in
this proxy statement. Management knows of no other business to be presented.
If other matters of business not presently known to management are properly
raised at the meeting, the proxies will vote on the matters in accordance with
their best judgement.
By order of the Board of Directors
KEY PRODUCTION COMPANY, INC.
[SIGNATURE OF MONROE W. ROBERTSON
APPEARS HERE]
Monroe W. Robertson
Senior Vice President and Secretary
NOTE: Stockholders are requested to sign, date and promptly return the
enclosed proxy card, using the enclosed envelope.
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PROXY
KEY PRODUCTION COMPANY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Francis H. Merelli, Monroe W. Robertson and
Cathy L. Anderson as Proxies, each with the power to appoint his or her
substitute, and authorizes them to represent and to vote at the annual meeting
of stockholders to be held June 8, 1995, or any adjournment thereof, all the
shares of common stock of Key Production Company, Inc. held of record by the
undersigned on April 12, 1995, as designated below.
1. ELECTION OF DIRECTORS--DIRECTOR NOMINEES:
Francis H. Merelli Cortlandt S. Dietler Timothy J. Moylan
[_] FOR ALL NOMINEES LISTED ABOVE (except as indicated below)
[_] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
TO WITHHOLD AUTHORITY TO VOTE FOR ANY OF THE ABOVE NOMINEES, WRITE THE
NOMINEE'S NAME(S) ON THIS LINE:
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2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. If acting as attorney, executor, trustee or in any
other capacity, sign name and title.
Dated:
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Signature
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Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD USING THE ENCLOSED ENVELOPE.
