-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cxRDzugfrbU7Me56QAKVLnY8/e8oo8iNiLvQB08Y4zmNCkN71U2K1+n/0wJN5GYG wSn1Ciug6UIrp18VdwmIIA== 0000950112-95-000959.txt : 19950414 0000950112-95-000959.hdr.sgml : 19950414 ACCESSION NUMBER: 0000950112-95-000959 CONFORMED SUBMISSION TYPE: SC 14F1 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950411 SROS: NYSE SROS: PSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MAXUS ENERGY CORP /DE/ CENTRAL INDEX KEY: 0000724176 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 751891531 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14F1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-34421 FILM NUMBER: 95528167 BUSINESS ADDRESS: STREET 1: 717 N HARWOOD ST- RM 3147 CITY: DALLAS STATE: TX ZIP: 75201-6594 BUSINESS PHONE: 2149532000 FORMER COMPANY: FORMER CONFORMED NAME: DIAMOND SHAMROCK CORP /DE/ DATE OF NAME CHANGE: 19870518 FORMER COMPANY: FORMER CONFORMED NAME: NEW DIAMOND CORP DATE OF NAME CHANGE: 19830908 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MAXUS ENERGY CORP /DE/ CENTRAL INDEX KEY: 0000724176 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 751891531 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14F1 BUSINESS ADDRESS: STREET 1: 717 N HARWOOD ST- RM 3147 CITY: DALLAS STATE: TX ZIP: 75201-6594 BUSINESS PHONE: 2149532000 FORMER COMPANY: FORMER CONFORMED NAME: DIAMOND SHAMROCK CORP /DE/ DATE OF NAME CHANGE: 19870518 FORMER COMPANY: FORMER CONFORMED NAME: NEW DIAMOND CORP DATE OF NAME CHANGE: 19830908 SC 14F1 1 Maxus Energy Corporation 717 North Harwood Street Dallas, Texas 75201 INFORMATION STATEMENT Pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 Thereunder INTRODUCTION This Information Statement is being mailed by Maxus Energy Corporation, a Delaware corporation (the "Company"), on or about April 11, 1995 to holders of record as of April 4, 1995 of shares of the Company's (i) common stock, par value $1.00 per share ("Common Stock"), and (ii) $4.00 Cumulative Convertible Preferred Stock, par value $1.00 per share (the "$4.00 Preferred Stock" and together with the Common Stock, the "Voting Shares"), in connection with the designation by YPF Sociedad Anonima, a sociedad anonima organized under the laws of the Republic of Argentina ("YPF"), of persons to be elected to the Board of Directors of the Company (the "Board of Directors") other than at a meeting of the Company's stockholders, in accordance with the Agreement of Merger among YPF, YPF Acquisition Corp. (the "Purchaser") and the Company, dated as of February 28, 1995 (the "Merger Agreement"). This Information Statement is being provided pursuant to Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1 thereunder. You are not required to take any action at this time. However, you are urged to read this Information Statement carefully. As of April 4, 1995, 135,587,364 shares of Common Stock and 4,356,958 shares of $4.00 Preferred Stock were outstanding. Each such share is entitled to one vote in the election of directors of the Company. The information contained in this Information Statement concerning YPF and the Purchaser and the Designees (as defined below) has been furnished to the Company by YPF and the Purchaser. MERGER AGREEMENT Pursuant to the Merger Agreement, on March 3, 1995, the Purchaser commenced a cash tender offer (the "Offer") to acquire all of the outstanding shares of Common Stock at a price of $5.50 per share of Common Stock, net to the seller in cash. Upon the expiration of the Offer, approximately 88.0% of the outstanding shares of Common Stock or approximately 85.3% of the outstanding Voting Shares had been tendered and were acquired by the Purchaser. The Merger Agreement provides that, after the completion of the Offer, and subject to the terms and conditions in the Merger Agreement, the Purchaser will be merged with and into the Company (the "Merger") and the Company will survive as the surviving corporation. Each then-outstanding share of Common Stock (other than shares of Common Stock held by YPF, the Purchaser, or any of their subsidiaries, or in the treasury of the Company, all of which will be cancelled, and shares of Common Stock held by stockholders who perfect their appraisal rights under Delaware law) will be converted into the right to receive $5.50 per share of Common Stock in cash. The Merger Agreement also provides that, upon the Purchaser's acquisition of a majority of the outstanding Voting Shares pursuant to the Offer, and from time to time thereafter so long as YPF and/or any of its direct or indirect wholly owned subsidiaries (including the Purchaser) owns a majority of the outstanding Voting Shares, YPF will be entitled, subject to compliance with applicable law and the Company's Restated Certificate of Incorporation, to designate at its option up to that number of directors, rounded up to the nearest whole number, of the Board of Directors as will make the percentage of the Company's directors designated by YPF equal to the percentage of outstanding Voting Shares held by YPF and any of its direct or indirect wholly owned subsidiaries (including the Purchaser), including shares of Common Stock accepted for payment pursuant to the Offer. The Company has agreed that it will, upon the request of YPF, promptly increase the size of the Board of Directors and/or use its reasonable best efforts to secure the resignation of such number of directors as is necessary to enable YPF's designees to be elected to the Board of Directors and will use its reasonable best efforts to cause designees to be so elected, subject to Section 14(f) of the Exchange Act; provided that, prior to the Effective Time (as defined in the Merger Agreement) of the Merger, the Company will use its reasonable best efforts to assure that the Board of Directors always has (at its election) at least three members who were directors of the Company as of February 28, 1995. At such times, the Company will use its reasonable best efforts, subject to any limitations imposed by law or rules of the New York Stock Exchange (the "NYSE"), to cause persons designated by YPF to constitute the same percentage as such persons represent on the Board of Directors of (i) each committee of the Board of Directors, (ii) each board of directors or board of management of each subsidiary of the Company and (iii) each committee of each such board. The Purchaser's beneficial ownership of approximately 85.3% of the outstanding Voting Shares would entitle it to be represented by ten of the 13 members of the Board of Directors pursuant to the above-described provision. YPF has designated five persons (Messrs. Jose A. Estenssoro, Cedric Bridger, James R. Lesch, Peter Gaffney and P. Dexter Peacock) (collectively, the "Designees") to be elected to the Board of Directors on or about ten days from the date of mailing of this Information Statement (the "Election Date"). See "The Board of Directors and Designees The Designees." The Company has advised YPF that it expects ten current directors (Messrs. John T. Kimbell, Richard W. Murphy, Jose Maria Perez Arteta, J. David Barnes, B. Clark Burchfiel, Bruce B. Dice, Michael C. Forrest, Charles W. Hall, Raymond A. Hay and W. Thomas York) (collectively, the "Resigning Directors") to submit their resignations from the Board of Directors, effective as of the Election Date, while Messrs. Charles L. Blackburn, George L. Jackson and R.A. Walker are expected to continue to serve on the Board of Directors (the "Continuing Directors"). See "The Board of Directors and Designees The Current Board of Directors." Upon the effectiveness of the resignations of the Resigning Directors, the Continuing Directors intend to elect the Designees to the Board of Directors to fill five of the ten vacancies created thereby. As a result of the foregoing, on the Election Date, the Board of Directors will consist of the five Designees and three Continuing Directors with five vacancies, constituting the quorum required by the Company's By-Laws (the "By-Laws"). 2 CHANGE OF CONTROL By reason of its beneficial ownership of approximately 85.3% of the outstanding Voting Shares, the designation of the five Designees to be elected to the Board of Directors and the transactions contemplated by the Merger Agreement, YPF may be deemed to control the Company. See "Source and Amount of Funds" for a discussion of the source and amount of consideration used by the Purchaser to acquire a controlling equity interest in the Company. THE BOARD OF DIRECTORS AND DESIGNEES General. The By-Laws provide that the number of directors shall be fixed by the Board of Directors and shall be no fewer than 12 nor more than 16. The directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, are classified with respect to the time for which they severally hold office into three classes, as nearly equal in number as possible. Each class has a three-year term. Currently, the Board of Directors consists of 13 directors. There are four directors whose terms will expire at the Company's Annual Meeting of Stockholders in 1997, four directors whose terms will expire in at the Company's Annual Meeting of Stockholders in 1996 and four directors whose terms will expire at the Company's Annual Meeting of Stockholders in 1995. In addition, one director (Mr. R.A. Walker) serves as a director of the Company pursuant to the terms of, and at the election of the holder of, the Company's $9.75 Cumulative Convertible Preferred Stock, par value $1.00 per share (the "$9.75 Preferred Stock"). The Designees. The name, age, present principal occupation or employment and the material occupations, positions, offices or employments for the past five years of each Designee are set forth below. Unless otherwise indicated, each such person has held the principal occupation or employment listed opposite his name for at least the past five years. Present Principal Occupation or Material Positions Held During Name Age the Past Five Years ---------------------- ----- ------------------------------ Jose A. Estenssoro 61 Mr. Estenssoro has been a Director of YPF since 1991 and President since 1990. He has been associated with YPF since 1990, when he was appointed Trustee by the Argentine Government. From 1987 through 1989, he was President of Compania Sol Petroleo S.A., and previously, from 1962 to 1987, he occupied various executive positions with Hughes Tool Company, where he was named President in 1987. Cedric Bridger 59 Mr. Bridger has been Vice President, Finance and Corporate Development of YPF since 1992. Before joining YPF, he was Marketing Manager for CVB Industrias Mecanicas in Brazil from 1989. Prior thereto, he was associated with Hughes Tool Company. 3 60 Mr. Gaffney is currently a Peter Gaffney Senior Partner of Gaffney, Cline & Associates ("Gaffney, Cline"), a company engaged in oil management consulting. He has been involved with such firm since 1962, being one of the founders. James R. Lesch 73 Mr. Lesch has been a Director of YPF since 1993. He is currently retired. He was Chief Executive Officer (1979-1986) and Chairman of the Board (1981-1986) of Hughes Tool Company and also served as Commissioner, State of Texas Department of Commerce (1988-1992). Previously, he served as Director of the American Petroleum Institute. P. Dexter Peacock 53 Mr. Peacock has been a partner of Andrews & Kurth L.L.P. since 1975. He is a member of the firm's Management Committee. He currently serves as a Director of Texas Commerce Bank National Association. The Current Board of Directors. Certain information regarding each of the current directors of the Company is set forth below. Unless otherwise indicated, each such person has held the principal occupation listed opposite his name for at least the past five years. Present Principal Occupation or Material Positions Held During Name Age the Past Five Years ------------------- ---- ---------------------------------- J. David Barnes 65 Mr. Barnes has been a Director of the Company since 1971. He is a member of the Compensation Committee, the Executive Committee and the Board Organization Committee. He is also Chairman emeritus of Mellon Bank Corporation and Mellon Bank, N.A. in Pittsburgh, Pennsylvania. Charles L. Blackburn 67 Mr. Blackburn has been a Director of the Company since 1986. He is a member of the Executive Committee and the Board Organization Committee and is the Chairman, President and Chief Executive Officer of the Company. Mr. Blackburn also serves as a Director of Lone Star Technologies, Inc. and Landmark Graphics Corporation. B. Clark Burchfiel 60 Dr. Burchfiel has been a Director of the Company since 1989. He is a member of the Compensation Committee. He is the Schlumberger Professor of Geology at the Massachusetts Institute of Technology. 4 68 Mr. Dice has been a Director of the Bruce B. Dice Company since 1987. He is a member of the Audit Review Committee and the Board Organization Committee. He is an oil and gas consultant and President of Dice Exploration Company, Inc., a company engaged in the business of oil and gas consulting in Houston, Texas and President of Wadi Petroleum Inc., a family-owned production company. Formerly, he was President of Transco Exploration Company, Houston, Texas. Michael C. Forrest 61 Mr. Forrest has been a Director of the Company since 1992. He is a member of the Executive Committee and has served as Senior Vice President, Business Development of the Company since 1994. Prior thereto, he was Vice Chairman and Chief Operating Officer of the Company. Prior to joining the Company in 1992, he was associated with Shell U.S.A. for more than five years, last serving as President of its subsidiary, Pecten International Company. Charles W. Hall 64 Mr. Hall has been a Director of the Company since 1991. He is a member of the Compensation Committee and the Board Organization Committee. Mr. Hall is a senior partner in the law firm of Fulbright & Jaworski, L.L.P., in Houston, Texas. Mr. Hall also serves as a Director of Texas Medical Center and Friedman Industries, Inc., in Houston, Texas. Raymond A. Hay 65 Mr. Hay has been a Director of the Company since 1979. He is a member of the Audit Review Committee. He is also the Chairman of Aberdeen Associates, an investment company. Previously, he was the Chief Executive Officer of The LTV Corporation. Mr. Hay also serves as a Director of National Medical Enterprises, Inc. George L. Jackson 66 Mr. Jackson has been a Director of the Company since 1987. He is a member of the Compensation Committee and the Board Organization Committee. Mr. Jackson is an oil field service consultant in Kerrville, Texas. John T. Kimbell 69 Mr. Kimbell has been a Director of the Company since 1974. He is a member of the Executive Committee and the Audit Review Committee. Mr. Kimbell is the President of John Kimbell Associates, a business consulting firm in Boston, Massachusetts. Jose Maria Perez 60 Dr. Perez Arteta has been a Arteta Director of the Company since 1994. He is a member of the Audit Review Committee. He is a partner in the law firm of Perez, Bustamante y Perez in Quito, Ecuador. 5 Richard W. Murphy 65 Mr. Murphy has been a Director of the Company since 1990. He is a member of the Compensation Committee. Mr. Murphy is a senior fellow for the Middle-East, Council on Foreign Relations and a consultant at Kissinger Associates in New York City. Mr. Murphy is also a member of the Board of Advisors of the Naval War College and the Chairman of the Chatham House Foundation (U.S.) and the Middle East Institute. R.A. Walker 38 Mr. Walker has been a Director of the Company since 1994. He is the Managing Director of Prudential Capital Group and Vice President of The Prudential Insurance Company of America ("Prudential"). Mr. Walker has held similar positions with Prudential Capital Group for the past five years. He was elected to the Board of Directors by Prudential pursuant to the terms of the $9.75 Preferred Stock. W. Thomas York 61 Mr. York has been a Director of the Company since 1978. He is a member of the Audit Review Committee. Previously, he was Chairman of the Board and Chief Executive Officer of AMF Incorporated in White Plains, New York. The Committees of the Board of Directors; Committee Meetings. The Board of Directors held a total of eight meetings in 1994. The percentage of meetings attended by each director out of the total number of meetings of the Board of Directors and of committees of the Board of Directors on which such director served exceeded 75%. The Board of Directors established four committees to assist in the discharge of its responsibilities. The committee membership of each director is set forth above in "The Current Board of Directors." Executive Committee. The Executive Committee may exercise many of the powers of the Board of Directors in the management of the business and affairs of the Company in the intervals between meetings of the Board of Directors. Although this Committee has very broad powers, in practice it meets only when it would be impractical to call a meeting of the Board of Directors. This Committee did not meet in 1994. Audit Review Committee. The Audit Review Committee reviews the professional services provided by the Company's independent accountants and the independence of such accountants from management of the Company. This Committee also reviews the scope of the audit coverage, the annual financial statements of the Company and such other matters with respect to the accounting, auditing and financial reporting practices and procedures of the Company as it may find appropriate or as have been brought to its attention. This Committee met five times in 1994. Compensation Committee. The Compensation Committee reviews and approves executive salaries and administers bonus, stock option and incentive compensation plans of the Company. This Committee advises and consults with management regarding significant employee benefit policies and practices and significant compensation policies and practices of the Company. This Committee met seven times in 1994. 6 Board Organization Committee. The Board Organization Committee considers and recommends criteria for the selection of nominees for election as directors and selects for presenta- tion to the Board of Directors recommended candidates for director. This Committee also considers on a continuing basis the composition, structure and functioning of the Board of Directors and its committees, reviews succession plans for the Chairman and Chief Executive Officer of the Company and considers nominations for corporate officer positions. This Committee met three times in 1994. The By-Laws provide that nominations of candidates for director will be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. The By- Laws require that stockholders intending to nominate candidates for election as directors deliver written notice thereof to the Secretary of the Company not later than 80 days in advance of the meeting of stockholders; provided, however, in the event the date of the meeting is not publicly announced by the Company by mail, press release or otherwise more than 90 days prior to the meeting, notice by the stockholder to be timely must be delivered to the Secretary of the Company not later than the close of business on the tenth day following the day on which such announcement of the date of the meeting was communicated to stockholders. The By-Laws further require that the notice set forth certain information concerning such stockholder and his nominees, including their names and addresses, a representation that the stockholder is entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, a description of all arrangements or understandings between the stockholder and each nominee, such other information as would be required to be included in a proxy statement soliciting proxies for the election of the nominees of such stockholder and the consent of each nominee to serve as a director of the Company if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with these requirements. Directors' Compensation. The Company pays each director who is not an employee of the Company an annual retainer of $20,000 and a fee of $1,000 for each meeting of the Board of Directors attended and for Board of Directors' committee meetings attended on days other than those on which the Board of Directors meets. Non-employee directors automatically participate in the Director Stock Compensation Plan (the "Stock Compensation Plan"). Under the Stock Compensation Plan, non-employee directors who do not defer their annual retainer under the deferred compensation plan described below receive, in lieu of that portion of their annual retainer allocable to four months in a given calendar year, a number of shares of Common Stock equal to 34% of the amount of their annual retainer ($6,800 in 1994) divided by the closing market price of the shares of Common Stock as of the end of such four-month period, rounded down to the nearest whole share. If a director defers only a portion of his annual retainer or ceases to be a director during the applicable four-month period, the number of shares of Common Stock he receives in lieu of his annual retainer is proportionally reduced. Under a deferred compensation plan, the annual retainer and/or meeting fees may be deferred in whole or in part at the election of the director. Compensation so deferred may be denominated in dollars or in shares of Common Stock determined by reference to the market price on the business day immediately preceding the date of credit. Share-denominated accounts will be credited with dividends, if any, and dollar amounts will bear interest at a rate indexed to an investment fund selected from time to time by the plan's administrator. The annual rate of such interest accruals for 1995 is 5.34%. The non-employee directors also participate in the 1992 Director Stock Option Plan (the "1992 7 Director Plan"). Under the 1992 Director Plan, non-employee directors receive grants of options to purchase 10,000 shares of Common Stock each when first elected and when re-elected as a director. Such options generally are not exercisable for six months, are for a ten-year term, have an exercise price equal to the closing market price on the day preceding the grant date and are not transferable except by will or the laws of the descent and distribution. The directors may participate in the Company's health insurance program available to all employees. In view of the proposed Merger, the operation of the Stock Compensation Plan and the 1992 Director Plan was suspended as of March 28, 1995. Also, see "Executive Officers" for a description of certain arrangements or understandings with Messrs. Gaffney and Blackburn. Upon the resignation of the Resigning Directors and the election of the Designees to the Board of Directors, the Company expects that certain of the Designees and the Continuing Directors will be appointed to certain of the committees described above. The Company anticipates that, after the Election Date, the Board of Directors will review the committee structure, retirement policy and compensation arrangements of the Board of Directors and the Board of Directors reserves the right to make such changes as it deems necessary or appropriate. Certain Transactions and Relationships. The Company has business transactions and relationships in the ordinary course of business with unaffiliated corporations and institutions of which certain of its directors, executive officers and substantial stockholders are affiliated, including the transactions discussed below. All such transactions are conducted on an arm's length basis. Prudential is the record or beneficial owner of more than 5% of one or more of the classes of the Company's voting securities. Mr. Walker, an officer of Prudential, was elected as a Director of the Company by Prudential as the holder of all of the $9.75 Preferred Stock pursuant to the terms thereof. During 1994, the Company offered its employees the opportunity to participate in medical programs administered by Prudential. In addition, during such year, Prudential provided services and coverages relating to pension and life insurance plans for retired employees of Gateway Coal Company, a partnership owned by the Company. Further, Prudential provided the Company certain software-related services in 1994. The Company has paid or will pay Prudential approximately $377,000 for these services. The Company and Prudential have agreed that Prudential will continue to perform such services during 1995 and anticipate that the fees for the year will be somewhat higher. On February 28, 1995, the Company and Prudential entered into an agreement pursuant to which Prudential agreed to consent to the Merger and, upon consummation of the Merger, to (i) waive certain rights, (ii) waive certain covenants restricting the Company's ability to take certain actions, and (iii) terminate the registration rights associated with the $9.75 Preferred Stock. Pursuant to this agreement, the Company has agreed to (i) waive certain rights, including the right to redeem the $9.75 Preferred Stock at its option and its right of first offer with respect to the transfer of the shares of $9.75 Preferred Stock, and (ii) pay to Prudential a restructuring fee of $250,000 upon consummation of the Merger. In 1994, the Company paid approximately $140,000 to the law firm of Perez, Bustamente y Perez for legal services rendered in connection with various matters. Dr. Perez Arteta, a Director of the Company, is a partner in Perez, Bustamente y Perez. 8 Dr. Burchfiel has from time to time served the Company by conducting training workshops and seminars, performing geological research and furnishing consultation with respect to selected potential exploration projects. As consideration for these services in 1994, approximately $32,600 was paid to Dr. Burchfiel individually and approximately $147,000 was paid to Massachusetts Institute of Technology, where Dr. Burchfiel is a professor of geology. In 1994, the Company paid approximately $218,000 to Mr. D.L. Black, a former director of the Company, for services rendered in connection with the sale of the Company's geothermal business. Mr. Black retired as director of the Company in May 1994. Gaffney, Cline provided oil and gas technical and management consulting services to the Company in 1994. Mr. Gaffney, a Designee who is expected to be named interim Chief Executive Officer of the Company on the Election Date, is a Senior Partner of Gaffney, Cline. The Company paid Gaffney, Cline approximately $144,300 in 1994 for these services. The Company and Gaffney, Cline have agreed that Gaffney, Cline will continue to provide such services during 1995 and anticipate that the fees for such services will be approximately the same as in 1994. EXECUTIVE OFFICERS Officers are elected annually by the Board of Directors and may be removed at any time by the Board of Directors. There are no family relationships among the executive officers listed below and there are no arrangements or understandings pursuant to which any of them were elected as officers. It is expected that Mr. Charles L. Blackburn will resign as Chairman, President and Chief Executive Officer of the Company on the Election Date. YPF has asked Mr. Blackburn to become an international consultant to YPF and to remain a director of the Company. Under the proposed two- year arrangement, Mr. Blackburn would be available to render consulting services for a minimum of 60 days per year and would be paid a retainer of $180,000 per year. Mr. Blackburn would also be paid $3,000 per day for each day in excess of 60 days per year in which he renders consulting services for YPF. He would also be provided offices in Dallas and Buenos Aires. In addition, Mr. Peter Gaffney, a Designee, is expected to be named the interim Chief Executive Officer of the Company on the Election Date. Mr. Gaffney is to receive $50,000 per month and will be eligible to participate in the Company's benefit plans for executive officers. This six-month arrangement between Mr. Gaffney and YPF is to be effective as of April 1, 1995, is renewable on mutual agreement and provides that, with respect to the period before Mr. Gaffney is named interim Chief Executive Officer, Mr. Gaffney will serve as an advisor to YPF with respect to the Company. Except as aforesaid, no arrangements or understandings exist between any executive officers of the Company and any other persons pursuant to which such persons were or are to be elected as executive officers. The name, age, present principal occupation or employment and the material occupations, positions, offices or employments for the past five years of each of the current executive officers of the Company are set forth below. Unless otherwise indicated, each such person has held the principal occupation listed opposite his name for at least the past five years, with responsibilities of the general nature indicated by his title, except as set forth below. 9 Present Principal Occupation or Material Name Age Positions Held During the Past Five Years ------------ ---- ---------------------------------------------- C.L. Blackburn 67 Chairman, President and Chief Executive Officer. See "The Board of Directors and Designees--The Current Board of Directors." M.C. Forrest 61 Senior Vice President, Business Development. See "The Board of Directors and Designees--The Current Board of Directors." S.G. Crowell 47 Senior Vice President, Producing Operations. Mr. Crowell joined the Company in 1976 as a geophysicist. Since such time, he has held various positions with the Company, including Senior Vice President, North American Exploration and Production, and Vice President, Administration. Mr. Crowell was named Senior Vice President, Producing Operations, in 1994. G.W. Pasley 44 Senior Vice President, Finance and Administration and Chief Financial Officer. Mr. Pasley joined the Company in 1984 as Associate Director of Investor Relations. Since such time, he has held various positions with the Company, including Director of Communications, Vice President, Human Resources and Senior Vice President, Operations. Mr. Pasley was named Senior Vice President, Finance and Administration and Chief Financial Officer, in 1994. M.J. Barron 45 Vice President and Treasurer. Mr. Barron was elected Vice President and Treasurer of the Company in 1994. Mr. Barron joined Natomas Energy Company ("Natomas") in 1982 as a Project Manager. Natomas was acquired by the Company in 1983, and Mr. Barron has held various positions with the Company, including Director of Strategic Planning and Vice President, Treasurer and Chief Financial Officer, since such time. G.R. Brown 52 Vice President and Controller. M.J. Gentry 43 Vice President, Administration. Mr. Gentry was named Vice President, Administration, in 1994. Mr. Gentry joined the Company in 1975 and has held various positions with the Company, including Associate Director of Management Information Systems Operations, Assistant Treasurer, General Manager of Human Resources, and Vice President, Human Resources and General Services, since such time. M. Middlebrook 59 Vice President and General Counsel. A former Vice President of the Company, L.E. Ardila, filed a Form 3 dated November 8, 1993 that erroneously reported the number of shares of Common Stock beneficially owned by him. After becoming aware of such error, Mr. Ardila filed an amended Form 3 dated January 13, 1995. 10 EXECUTIVE OFFICER COMPENSATION The following tables set forth all compensation awarded to, earned by or paid to the executive officers named below in 1992, 1993 and 1994. SUMMARY COMPENSATION TABLE Long Term Compensation Awards ---------------------------------
Annual Compensation Restricted Securities All ------------ Name and Stock Underlying Other Principal Position Year Salary($) Bonus($) Awards($) Options/SARs(#) Compensation($) ------------------ ---- -------- ------- --------- --------------- -------------- C.L. Blackburn 1994 519,996 200,000 0(1) 185,000 31,200(5) Chairman, 1993 512,496 100,000 0 0 30,750(5) President and Chief 1992 482,496 500,000 0 65,600 28,950(5) Executive Officer M.C. Forrest 1994 304,020 100,000 0 65,000 18,241(5) Sr. Vice President 1993 298,020 75,000 0 0 17,881(5) 1992 213,345 85,000 0 50,000 91,508(6) S.G. Crowell 1994 236,544 100,000 0(2) 75,000 14,193(5) Sr. Vice President 1993 222,669 60,000 0 0 13,360(5) 1992 212,547 95,000 0 20,400 12,753(5) G.W. Pasley 1994 208,440 100,000 0(3) 65,000 12,506(5) Sr. Vice President 1993 197,640 45,000 0 0 11,930(5) 1992 183,540 82,500 0 24,500 11,012(5) M. Middlebrook 1994 186,270 65,000 0(4) 28,000 11,176(5) Vice President and 1993 182,520 30,000 0 0 10,951(5) General Counsel 1992 176,895 75,000 0 12,000 10,614(5) _________________________
(1) As of December 31, 1994, Mr. Blackburn owned 19,016 shares of restricted stock having an aggregate market value of $64,179. (2) As of December 31, 1994, Mr. Crowell owned 6,260 shares of restricted stock having an aggregate market value of $21,128. (3) As of December 31, 1994, Mr. Pasley owned 3,756 shares of restricted stock having an aggregate market value of $12,677. (4) As of December 31, 1994, Mr. Middlebrook owned 2,712 shares of restricted stock having an aggregate market value of $9,153. (5) These payments represent the Company's matching contributions to the qualified and non-qualified saving plans' accounts of the named executive officers. (6) $81,708 of the amount shown for Mr. Forrest in the All Other Compensation column for 1992 are associated with his relocation from Houston to Dallas upon his initial employment. The remainder, $9,800, represents the Company's matching contribution to the qualified and non-qualified saving plans' accounts of Mr. Forrest for that year. Pursuant to the Merger Agreement, effective immediately prior to the Effective Time, the restrictions on all shares of restricted Common Stock will lapse.
11 OPTION/SAR GRANTS IN LAST FISCAL YEAR Individual Grants ----------------------------------------
Percent of Number of Total Securities Options/SARs Underlying Granted to Exercise or Grant Date Options/SARs Employees in Base Expiration Present Name Granted (#) (1) Fiscal Year Price ($/Sh) Date Value($)(2) --------------- -------------- ------------ ------------ --------- ----------- C. L. Blackburn 185,000 34.37% 5.00 6/17/04 555,000 M.C. Forrest 65,000 12.43% 5.00 6/17/04 226,850 S.G. Crowell 75,000 14.34% 5.00 6/17/04 268,500 G.W. Pasley 65,000 12.43% 5.00 6/17/04 232,700 M. Middlebrook 28,000 5.35% 5.00 6/17/04 100,240 ________________________
(1) The named executive officers were granted the stated number of options and a like number of SARs in tandem with the options. Both the options and tandem SARs become exercisable on June 16, 1995. (2) The grant date present value was determined using a variation of the Black-Scholes option pricing model. In determining such value, the expected volatility of the Common Stock was assumed to be 50%, the risk-free rate of return was based on zero coupon Treasury yields as listed in The Wall Street Journal on June 16, 1994 for trading activity on June 15, 1994 (ranging from 5.09% to 7.31%), no dividend yield was assumed since dividends are not currently paid on Common Stock, and the time of exercise was assumed to be immediately before expiration of the options. No adjustments were made for non-transferability or risk of forfeiture, except that an adjustment was made to reflect the probability of retirement based on actuarial estimates and retirement no later than age 70.
12
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES Value of Unexercised Number of Securities In-the-Money Underlying Unexercised Options/SARs Options/SARs at at Fiscal Year Value Fiscal Year-End(#) End ($) Shares Acquired Realized Exercisable/ Exercisable/ Name on Exercise (#) ($) Unexercisable Unexercisable --------------- --------------- -------- ----------------- --------------- C.L. Blackburn 0 N/A 271,933/185,000 0/0 M.C. Forrest 0 N/A 50,000/65,000 0/0 S.G. Crowell 0 N/A 85,214/75,000 0/0 G.W. Pasley 0 N/A 43,608/65,000 0/0 M. Middlebrook 0 N/A 38,583/28,000 0/0
Change in Control Agreements. The Company has entered into agreements with Mr. Charles L. Blackburn and each of the other named executive officers which were binding upon execution but become operative only upon the occurrence of a change in control of the Company as defined therein. The transactions contemplated by the Merger Agreement constitute a change of control for purposes of these agreements. Under these agreements, in the event of a change in control, the executive officer will be entitled to continue in the employ of the Company until the earlier of the expiration of the third anniversary of the occurrence of a change in control or the executive's death at an annual base salary of not less than the rate in effect upon the occurrence of a change in control plus an incentive award of not less than the highest such award received by the executive for any year in the three calendar years immediately preceding the change in control. In the event the Company terminates the executive's employment during such term without cause, the executive will be entitled to receive as severance compensation a lump-sum payment equal to the present value of the cash compensation payable under the agreement in the absence of such termination, not to exceed 299% of his "base amount" as defined in the Internal Revenue Code of 1986, as amended (the "Code"), without any reduction for subsequent earnings. Under these agreements, continuation of benefits under employee benefit plans of the Company is provided after termination during the remainder of the original term of employment. The agreements include provisions that limit the amounts payable under them in certain circumstances in which the net after-tax amount received by the officer would be reduced as a result of the applicability of the 20% excise tax imposed in respect of certain change in control payments under the Code. The Company has assumed the obligation to pay certain fees and expenses of counsel incurred by the executive officers if legal action is
13 required to enforce their rights under the agreements and has secured such obligation by obtaining a letter of credit issued by a commercial bank. On April 7, 1995, all of the Company's executive officers gave notice of their intent to resign under circumstances in which they had the right to receive severance payments thereunder. In order to facilitate the transition following such event, the Company and its eight executive officers agreed that the executive officers would continue to work for the Company in their present positions at their current level of compensation until June 30, 1995 or otherwise mutually agreed. The Company also agreed to pay the executive officers such severance payments no later than April 15, 1995. Pursuant to said agreement and the change in control agreements, each of the executive officers named in the Summary Compensation Table, and all executive officers as a group, will receive the following amounts: Mr. Blackburn, $2.7 million; Mr. Forrest, $1.0 million; Mr. Crowell, $1.0 million; Mr. Pasley, $.9 million; Mr. Middlebrook, $.8 million; and all executive officers as a group, $8.2 million. Separation Pay Plan. Under the Separation Pay Plan, most employees (other than non-resident aliens), including Mr. Blackburn and the other named executive officers, are eligible for separation pay if their employment is terminated for any reason other than death, voluntary termination of employment, voluntary retirement or discharge for reasons of criminal activity, willful misconduct, gross negligence in the performance of duties or violation of Company policy. The payment to be received under the plan by a particular employee depends on his job classification and length of service and whether termination occurs after the elimination of the employee's position or a change in control of the Company (as defined in the plan). In the case of the named executive officers, the plan provides in most cases for separation pay in an amount equal to two-weeks' base pay for each year of service with the Company, plus three months' base pay, not to exceed a maximum of 12 months, base pay; and, in the case of a change in control of the Company, separation pay in an amount equal to one month's base pay for each year of service with the Company, but not less than 12 months' base pay nor more than 24 months' base pay. The plan requires that employees sign releases as a condition of receiving separation pay. Executive officers are not entitled to separation pay under the plan to the extent they receive severance payments under the change in control agreements discussed above. The transactions contemplated by the Merger Agreement constitute a change in control for purposes of the Separation Pay Plan. Retirement Program. Effective February 1, 1987, the Company adopted a new retirement income plan (the "New Retirement Income Plan") applicable to most of its employees to replace the Company's former retirement income plans under which such employees ceased to accrue benefits on January 31, 1987. Under the New Retirement Income Plan, a covered employee acquires a right upon retirement to a yearly amount equal to 2% of the employee's earnings during each year from February 1, 1987 forward (rather than on final compensation or average final compensation) without offset for social security benefits. Benefits under the New Retirement Income Plan become vested after five years of service. Benefits may be paid in equal monthly installments, starting on the date of retirement and continuing until death, or employees may select one of a number of optional forms of payment having equal actuarial value as provided in the plan. The benefits payable under the New Retirement Income Plan are subject to maximum limitations under the Employee Retirement Income Security Act of 1974, as amended, and the Code. In the case of the named executives, 14 if benefits at the time of retirement exceed the then permissible limits of such statutes, the excess would be paid by the Company from the "SERP" described below. The Company has an unfunded Supplemental Executive Retirement Plan (the "SERP") that provides additional benefits to the Company's highest ranking officer (Mr. Blackburn), the other named executives and to certain executive employees designated by said highest ranking officer. Under the SERP, a participant acquires the right upon retirement to a lump sum amount which is the actuarial equivalent of a straight life or, if married, a 50% joint and survivor annuity payable monthly in an amount equal to (i) the sum of (a) 1.6% of the participant's average monthly compensation in 1986 times his years of service through January 31, 1987, plus (b) 2% of the participant's average monthly compensation after January 31, 1987 times his years of service after January 31, 1987 plus an additional five years less (ii) the amount of the benefits calculated for such participant under the Company's other retirement plans. The maximum benefit payable is 60% of the participant's high three-year average pay. The amounts calculated under the SERP are not subject to any reduction for Social Security and are not determined primarily by final compensation or average final compensation and years of service. If a participant dies while still employed by the Company and is survived by an eligible spouse, his surviving spouse will receive a lump-sum payment equal to the present value of one-half of the benefit which would have been payable to the participant at his normal retirement age under the SERP assuming he had terminated employment with the Company at the time of his death with a vested interest under the SERP and that he survived to his normal retirement age. In the case of retirement after age 55 but before age 60, the supplemental retirement benefits generally will be reduced by 5% for each year that the employee's actual retirement date precedes age 60. The benefits provided under the plan will vest upon completion of five years of service or attainment of age 55. The estimated annual benefits payable upon retirement at normal retirement age (or January 1, 1995 in those cases where the participant's age on that date was greater than normal retirement age) under the Company's retirement plans as supplemented by the SERP based on service and compensation through December 31, 1994 for the executive officers named in the compensation table are as follows: Mr. Blackburn: $180,699; Mr. Forrest: $60,200; Mr. Crowell: $96,224; Mr. Pasley: $54,227; and Mr. Middlebrook: $63,380. Whether any amounts actually become payable in whole or in part depends on the contingencies and conditions governing the applicable retirement plan. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION General The Compensation Committee of the Board of Directors (the "Committee") is composed of five directors who are not current or former officers or employees of the Company. The Committee is responsible for reviewing and approving the compensation paid to executive officers of the Company, including salaries, bonuses, stock options and other incentive awards. Following review and approval by the Committee, material actions pertaining to executive compensation are reported to the full Board of Directors. 15 Compensation Policy for Executive Officers The Committee's policy regarding executive pay is generally the same as the Company's policy with respect to all other management level employees. That policy has the following objectives: - to enhance the Company's competitiveness by attracting and retaining quality talent - to link employee's long-term earnings to the long-term success of the Company - to reward individual performance as well as team accomplishments - to and target each component of total compensation at the 50th percentile range for similar jobs, as determined by reference to a survey or surveys of selected oil and gas companies1 The Committee continuously attempts to assess the reasonableness and competitiveness of the Company's compensation program and to ensure that the program is adequately designed to attract, motivate and retain talented executives, and also to have linkage between executive compensation and Common Stock value. The Committee's practice has been to retain an independent outside consultant, at intervals of approximately five years, to assist it in this regard by making an independent assessment. The last such independent assessment was conducted in 1993. The Company does not believe it will pay any employee compensation in 1995 that will cause it to exceed the $1 million deduction limit under Section 162(m) of the Internal Revenue Code of 1986, as amended. If it appears that employee compensation will exceed the deduction limit in the future, the Company presently intends to comply with Section 162(m) as circumstances allow, unless the Committee determines that required changes would not be in the Company's best interest. Components of Compensation Base Salary. The Committee annually reviews the Chief Executive Officer's and the other executive officers' base salaries. In determining an appropriate salary adjustment, -------------------- 1 The Committee reviewed survey information for 19 U.S. based independent oil and gas companies to determine the 50th percentile of total compensation for comparable executive positions, including all of the U.S. based companies included in the performance graph. These 19 companies were selected because they participated in compensation surveys performed by an independent consultant and reviewed by the Committee (the "Compensation Survey"). The performance of these companies was not considered in determining the Company's executives' compensation. The non-U.S. based companies included in the performance graph were not included because they did not participate in the Compensation Survey and the Committee believes there are significant differences between compensation practices of U.S. based and non-U.S. based oil and gas companies. 16 consideration is given to level of responsibility, experience of the individual, the degree to which planned objectives were achieved and competitiveness of the executive's compensation. As stated above, the Company targets total compensation at the 50th percentile range for similar positions at other U.S. based independent oil and gas companies. Based on the Compensation Survey, the average of the Company's executive officers' base salaries as of April 1994 was on, average, seven percentage points below the targeted levels. Mr. Blackburn (the "CEO") has been the Chairman, President and Chief Executive Officer of the Company since 1987. His base salary did not increase in 1994. The Committee determined not to increase the CEO's base salary in 1994 since his monthly base rate (after giving effect to his 6.1% salary increase in April 1993) approached the targeted level. The CEO's base salary as of April 1994 was two percentage points below the median level for similar positions in the Compensation Survey. Annual Incentives. The CEO and other executive officers are considered for annual bonus incentive awards to reward individual performance against established objectives. The total award pool for all eligible employees is first calculated as the sum of a percentage of base salary for each eligible position. The target percentage for each position is established by reviewing the Compensation Survey information. The percentage of base salary targeted for annual bonus increases with the level of responsibility. This award pool can be adjusted 50% up or down based on actual performance of the Company as measured against the targets for cash flow and return on capital employed as established in the annual plan of the Company. Further adjustments may be made for unusual events or events outside the control of the Company's management, such as variances due to the price of oil and gas. Individual amounts are awarded to the CEO and each executive officer on a discretionary basis after reviewing the officer's performance against various factors, including established objectives that vary by executive, internal equity with any other officers with similar responsibilities and the established target award for the position being considered. The bonus pool for executive officers for 1994 was below the $831,000 targeted amount with $727,000 being awarded to eight individuals within this group. The reasons the executive officers were awarded less than the targeted amount were that the Company did not meet its 1994 objectives with respect to cash flow and return on capital employed. Based on the Company's performance with respect to these objectives, the 1994 bonus pool for the eight executive offers should have been 97.3% of the targeted amount (or $808,000); however, the Committee made the subjective determination to reduce the award amount further due to the performance of the Common Stock in 1994. The CEO was granted a bonus of $200,000 in December 1994 (or approximately 38% of his base salary). The Committee awarded this amount based upon its evaluation of the CEO's performance in connection with restructuring activities during 1994. The restructuring, activities have led to an estimated reduction in overhead of approximately $8 million per year, the successful sale of the Company's gulf coast properties, the refocusing on certain core areas of operations and the development of various funding options to support the Company's future operations. Long-Term Incentives. The Company's stockholders have approved the Company's virtually identical 1986 and 1992 Long- Term Incentive Plans (the "Plans"). The Plans permit granting officers and other key employees of the Company stock options, stock appreciation 17 rights ("SARs"), performance units and awards of Common Stock (including restricted stock) or other securities of the Company on terms and conditions determined by the Committee. The Committee believes that these equity based awards are an integral part of the Company's overall compensation program for the CEO and other executive officers. Through these grants, the actual amount of such officers' long-term compensation is dependent on future increases in stockholder value. During 1994, the Company granted options and tandem SARs to the CEO and other executive officers. As previously reported, the Committee presently intends (assuming the proposed merger with YPF Acquisition Corp. is not consummated) to consider granting this group of employees options/SARs every other year and performance units in years in which options/SARs are not awarded. Various factors may be taken into account in considering the number of options an individual is granted, including performance in achieving the Company's strategic plan objectives, level of responsibility and survey information reflecting the value of awards to similar positions at other oil and gas companies. The CEO and executive officers are granted SARs in tandem with the stock options. SARs entitle the holder, upon exercise and contemporaneous surrender and cancellation of the related options, to receive cash or stock, or a combination of both, in an amount equal to the difference between the market value of the Common Stock (calculated as specified in the Plans on the date of exercise) and the exercise price of the SARs. For purposes of stock options grants and comparisons of competitive awards, options are valued according to a variation of the Black-Scholes option pricing model. This type of pricing model is used to value options traded in public markets. The option exercise price is set at the closing market price of the Common Stock preceding the day of the grant and the Company does not adjust the exercise price for drops in the price of the Common Stock. In June 1994, the CEO was granted the option to purchase 185,000 shares of Common Stock at a price of $5.00 per share. SARs were also issued in tandem with these options. The grant was based on survey date reflecting the value of awards to similar positions at other oil and gas companies. The Committee believes that, like the use of performance units, the use of options serves to help align the compensation of the CEO and other executive officers with interest of the stockholders. Specifically, the options will only have value if the market value of the Common Stock increases after the date of grant. Members of the Compensation Committee: J. David Barnes, Chairman B. Clark Burchfiel Charles W. Hall George L. Jackson Richard W. Murphy BENEFICIAL OWNERSHIP OF SECURITIES The following table sets forth the beneficial ownership (as defined in the rules of the Securities and Exchange Commission) as of March 31, 1995 of the Company's equity securities of the directors, the named executive officers and all directors and executive officers as a group. At such date, all directors and executive officers as a group beneficially owned less 18 than 1% of the $4.00 Preferred Stock outstanding and less than 1% of the Common Stock outstanding. None of the directors or executive officers beneficially owned any shares of the Company $9.75 Preferred Stock or $2.50 Cumulative Preferred Stock (the "$2.50 Preferred Stock").
Amount and Nature of Securities Name of Beneficial Owner Title of Security Beneficially Owned (1) ------------------------- ------------------- ---------------------- J. David Barnes . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2) $4.00 Preferred Stock . . . . . . . 0 C.L. Blackburn . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 290,949 (3) $4.00 Preferred Stock . . . . . . . 0 B. Clark Burchfiel . . . . . . . . . . . Common Stock . . . . . . . . . . . . 10,000 (2) $4.00 Preferred Stock . . . . . . . 0 S.G. Crowell . . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 91,474 (3) $4.00 Preferred Stock . . . . . . . 0 Bruce B. Dice . . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 10,000 (2) $4.00 Preferred Stock . . . . . . . 0 Michael C. Forrest . . . . . . . . . . . Common Stock . . . . . . . . . . . . 50,000 $4.00 Preferred Stock . . . . . . . 0 Charles W. Hall . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 10,000 (2) $4.00 Preferred Stock . . . . . . . 0 Raymond A. Hay . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 10,319 (2) $4.00 Preferred Stock . . . . . . . 0 George L. Jackson . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2) $4.00 Preferred Stock . . . . . . . 0 John T. Kimbell . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2) $4.00 Preferred Stock . . . . . . . 0 M. Middlebrook . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 41,295 (3) $4.00 Preferred Stock . . . . . . . 133 Richard W. Murphy . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2) $4.00 Preferred Stock . . . . . . . 0 George W. Pasley . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 47,364 (3) $4.00 Preferred Stock . . . . . . . 0 19 Amount and Nature of Securities Name of Beneficial Owner Title of Security Beneficially Owned (1) ------------------------- ------------------- ---------------------- Jose Maria Perez Arteta . . . . . . . . . Common Stock . . . . . . . . . . . . 10,000 (2) $4.00 Preferred Stock . . . . . . . 0 R.A. Walker . . . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 10,000 (2)(4) $4.00 Preferred Stock . . . . . . . 0 W. Thomas York . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . 20,000 (2) $4.00 Preferred Stock . . . . . . . 0 Directors and executive . . . . . . . . . Common Stock . . . . . . . . . . . . 857,004 (2)(3)(4) officers as a group $4.00 Preferred Stock . . . . . . . 133 ________________________
(1) These amounts include shares of Common Stock covered by options exercisable within 60 days, as follows: Mr. Barnes, 20,000; Mr. Blackburn, 271,933; Dr. Burchfiel, 10,000; Mr. Crowell, 85,214; Mr. Dice, 10,000; Mr. Forrest, 50,000; Mr. Hall, 10,000; Mr. Hay, 10,000; Mr. Jackson, 20,000; Mr. Kimbell, 20,000; Mr. Middlebrook, 38,583; Mr. Murphy, 20,000; Mr. Pasley, 43,608; Dr. Perez Arteta, 10,000; Mr. Walker, 10,000; Mr. York, 20,000; and all directors and executive officers as a group, 817,009. Pursuant to the Merger Agreement, the Company has agreed to offer the holders of employee and director stock options, including all current directors and executive officers of the Company, the opportunity to surrender their options, including any related stock appreciation rights, in exchange for amounts determined in accordance with the provisions of Schedule 2.6 to the Merger Agreement, which schedule is based, in general, on the Black-Scholes methodology for valuing options. If all such options are surrendered, the holders thereof, including certain directors and executive officers of the Company, will receive an aggregate amount of approximately $4.7 million. Of that amount, the executive officers named in the table above, all executive officers of the Company as a group, and all directors of the Company as a group would receive approximately the following amounts: Mr. Blackburn, $1,100,000; Mr. Forrest, $385,000; Mr. Crowell, $390,000; Mr. Pasley, $335,000; Mr. Middlebrook, $160,000; the executive directors as a group, $2,900,000; and all directors of the Company (other than Messrs. Blackburn and Forrest) as a group, $545,000. (2) These amounts do not include $6,800 worth of Common Stock the non-employee directors are entitled to under the Stock Compensation Plan, which such directors are expected to receive in April 1995. Assuming a market value of $5.50 per share of Common Stock, each such non-employee director will receive 1,236 shares of Common Stock not reflected above. (3) These amounts include shares of "restricted stock" i.e., Common Stock subject to restriction for a period of years, as to which the holders have sole voting power, but not investment power, during the restricted period, as follows: Mr. Blackburn, 19,016; Mr. Crowell, 6,260; Mr. Pasley 3,756; Mr. Middlebrook, 2,712; and all directors and executive officers as a group, 38,424. The Merger Agreement provides that all restrictions on restricted stock will lapse at the Effective Time. The aggregate value of all such restricted stock, based on the $5.50 per share of Common Stock 20 price to be paid in the Merger, is approximately $5.2 million. Of that amount, the executive officers named in the table above and all executive officers as a group would receive the following amounts: Mr. Blackburn, $104,558; Mr. Forrest, $0; Mr. Crowell, $34,430; Mr. Pasley, $20,658; Mr. Middlebrook, $14,916; and all executive officers as a group, $215,000. (4) Does not include shares owned by Prudential, as to which Mr. Walker disclaims beneficial ownership. To the knowledge of the Company, and with the exception of the ownership of 2,000 shares of Common Stock by Mr. Lesch, none of the Designees beneficially owns any equity securities of the Company. To the knowledge of the Company, as of March 31, 1995, no person beneficially owned more than 5% of any class of the Company's voting securities except as set forth below:
Amount and Nature of Shares Beneficially Percent Name and Address or Beneficial Owners Title of Class Owned of Class ------------------------------------- -------------- --------- -------- YPF Acquisition Corp.. . . Common Stock 119,339,683 (1) 88.0% Avenida Pte. Roque Saenz Pena 777 1364 Buenos Aires Argentina YPF Sociedad Anonima.. . . Common Stock 119,339,683 (2) 88.0% Avenida Pte. Roque Saenz Pena 777 1364 Buenos Aires Argentina The Prudential Insurance Company of America . . . . . . . Common Stock 8,039,242 (3)(4) 5.6% Prudential Plaza $9.75 Preferred 1,250,000 (4) 100.0% Stock Newark, New Jersey 07102-3777 Kidder, Peabody Group Inc. Common Stock 8,000,000 (5) 5.6% 10 Hanover Square New York, New York 10005
_________________ (1) Consists of shares of Common Stock held of record by the Purchaser. (2) Consists of shares of Common Stock held of record by the Purchaser, which may be deemed to be beneficially owned by YPF by reasons of YPF's direct beneficial ownership of 100% of the capital stock of the Purchaser. 21 (3) Prudential reported on Amendment No. 6 to Schedule 13G, dated January 31, 1995, in connection with beneficial ownership at December 31, 1994, that it had sole dispositive and voting power with respect to 59,837 shares of Common Stock indicated above as beneficially owned by it, shared voting power with respect to 66,305 of such shares of Common Stock and shared dispositive power with respect to 69,405 of such shares of Common Stock. Prudential indicated that it may have direct or indirect voting and/or investment discretion over 129,242 of such Shares which were held for the benefit of its clients by its separate accounts, externally managed accounts, registered investment companies and/or other affiliates. It also indicated that the remainder of shares of Common Stock reported by it resulted from the assumed conversion of shares of $9.75 Preferred Stock. Except as provided in Footnote 4 below, the information herein assumes that Prudential's ownership has not changed as of March 3, 1995, and is included in reliance on such Amendment No. 6. (4) On February 28, 1995, the Company and Prudential entered into an agreement pursuant to which Prudential has waived certain rights, including conversion rights and registration rights, subject to consummation of the Merger. See "The Board of Directors and Designees Certain Transactions and Relationships." (5) Kidder, Peabody Group Inc. ("Kidder") reported on Schedule 13D, dated October 10, 1992, that it owns 8,000,000 warrants, each representing the right to purchase from the Company at any time prior to 5:00 p.m. on October 10, 1997, one share of Common Stock at a price of $13.00 per share. The 8,000,000 shares of Common Stock reported as beneficially owned by Kidder result from the assumed exercise of all 8,000,000 of such warrants. According to said Schedule 13D, General Electric Company is the indirect parent of Kidder. The information herein regarding such shares of Common Stock assumes that Kidder's beneficial ownership thereof had not changed as of March 31, 1995, and is included herein in reliance in such filing, except that the percent of class is based upon the Company's calculations made in reliance upon the information regarding such Shares contained in such filing. 22 STOCK PERFORMANCE GRAPH The following graph shows a comparison of five-year cumulative returns (assuming reinvestment of any dividends), among the Company, the Standard & Poor's 500 Stock Index and a peer group selected by the Company. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG THE COMPANY, S&P 500 INDEX AND A PEER GROUP INDEX Year-End Data 1989 1990 1991 1992 1993 1994 -------- ----- ----- ----- ----- ---- --- Maxus $100 $82.9 $67.1 $62.2 $54.9 $32.9 S&P 500 100 97.0 126.5 137.5 149.8 151.8 Peer Group 100 86.6 82.4 85.4 101.3 87.5 The stock performance graph assumes $100 was invested on December 29, 1989 in the Common Stock, the S&P 500 Stock Index and the peer group. Investments in the peer group have been weighted according to the respective issuer's stock market capitalization at the beginning of each period for which a return is indicated. The peer group is composed of 14 companies (named below) whose primary business, like that of the Company, is exploring for and producing oil and gas. The companies were selected to represent a composite similar to the Company in size and mix of domestic and international business. The group consists of large independent exploration and production companies whose market equity exceeded $500 million in 1990 or in the year in which data for the company became available. The primary business of eight companies is domestic, and 23 six companies are primarily international. The performance index is based upon data beginning with 1990 except for Lasmo plc which was included in the index starting in 1992 when complete data for the year became available. Also, the performance index does not include Bow Valley Industries Ltd. for 1994 because it was acquired by another company in that year. The 14 companies are: Anadarko Petroleum Corporation, Apache Corporation, Bow Valley Industries Ltd., Burlington Resources Inc., Canadian Occidental Petroleum Ltd., Enron Oil & Gas Company, Enterprise Oil plc, Lasmo plc, Louisiana Land & Exploration Company, Noble Affiliates Inc., Oryx Energy Company, Ranger Oil Limited, Santa Fe Energy Resources, Inc., and Union Texas Petroleum Holdings, Inc. In the index used for the immediately preceding fiscal year, the peer group did not include Apache Corporation or Ranger Oil Limited because the market equity of each was less than $500 million; however, if a line representing the same group of companies without Apache and Ranger were superimposed on the above graph, it would be indistinguishable from the line on the above graph representing the fourteen companies now included in the group. The plot points for the line representing a group without Apache and Ranger would be as follows for the year-ends indicated: 1990 - $85.8; 1991 - $80.8; 1992 - $84.4; 1993 - $100.2; 1994 - $84.8. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee of the Board of Directors currently consists of Mr. Barnes, Chairman, Dr. Burchfiel, and Messrs. Hall, Jackson and Murphy. Dr. Burchfiel has, from time to time, served the Company by conducting training workshops and seminars, performing geological research and furnishing consultation with respect to selected potential exploration projects. As consideration for these services in 1994, approximately $32,600 was paid to Dr. Burchfiel individually and approximately $147,000 was paid to Massachusetts Institute of Technology. SOURCE AND AMOUNT OF FUNDS General. The total amount of funds required by the Purchaser to acquire the entire common equity interest in the Company, including the purchase of shares of Common Stock pursuant to the Offer and the payment for shares of Common Stock converted into the right to receive cash pursuant to the Merger, and to pay related fees and expenses, is expected to be approximately $800 million. On April 5, 1995, the Purchaser entered into a credit agreement with lenders for which The Chase Manhattan Bank (National Association) ("Chase") acts as agent, pursuant to which the lenders extended to the Purchaser a $550 million loan facility (the "Purchase Facility"). On April 5, 1995, the Purchaser borrowed $442.2 million under the Purchaser Facility and received a capital contribution of $250 million from YPF. The Purchaser used such borrowings under the Purchaser Facility and the funds contributed to it from YPF to purchase shares of Common Stock pursuant to the Offer. The Company has been advised by YPF and the Purchaser that the payment for shares of Common Stock converted into the right to receive cash pursuant to the Merger will be made from additional borrowings by the Purchaser under the Purchaser Facility and from additional capital contributions from YPF. YPF has also received a commitment letter (the "Commitment Letter") from Chase pursuant to which Chase has agreed to provide two additional credit facilities aggregating up 24 to $425 million: (i) a credit facility of up to $250 million to be extended to Midgard Energy Company ("Midgard"), a wholly owned subsidiary of the Company (the "Midgard Facility"), and (ii) a credit facility of up to $175 million to be extended to certain other subsidiaries of the Company as described below (the "Subsidiaries Facility"). Revised term sheets for the Midgard Facility and the Subsidiaries Facility are annexed to the Credit Agreement for the Purchaser Facility. The proceeds of the Midgard Facility and the Subsidiaries Facility will be used to repay, in part, the Purchaser Facility. Chase has confirmed that it is willing to provide the entire amount of these two additional facilities. Chase also has advised YPF that it intends to arrange one or more syndicates of commercial banks, financial institutions and other investors to provide a portion of these facilities and that it proposes to act as the agent for such lenders in connection with each of the facilities. The following is a description of the principal terms of the Purchaser Facility and a description of the proposed terms of the Midgard Facility and the Subsidiaries Facility. Purchaser Facility. The Purchaser Facility provides for loans in an aggregate amount of up to $550 million (collectively, the "Purchaser Loan") and will mature on the earlier of (i) the Effective Time and (ii) June 12, 1995 (such earlier date being the "Purchaser Maturity Date"). The Purchaser borrowed $442.2 million under the Purchaser Facility on April 5, 1995, and may obtain one additional advance thereunder up to the remaining $107.8 million of credit available thereunder. At the Purchaser's option, the interest rate applicable to the Purchaser Loan is either (i) the one-month London Interbank Offered Rate plus a margin of 21/4% or (ii) the Base Rate (defined in the Credit Agreement relating to the Purchaser Facility) plus a margin of 11/4%. The Purchaser Loan is guaranteed by YPF as described below. In addition, prior to the Merger, the Purchaser has agreed not to dispose of any such shares of Common Stock except for cash at fair market value. The Lenders' obligation to fund the remaining amount of credit available under the Purchaser Facility is subject to certain conditions as described below. It is anticipated that up to $125 million of the Purchaser Loan, plus accrued interest on the Purchaser Loan, will be repaid on the Purchaser Maturity Date from cash held by the Company. Midgard Facility. The Company anticipates that Midgard will provide the funds from the proceeds of a loan of up to $250 million (the "Midgard Loan") pursuant to the Midgard Facility. The Midgard Loan will be made in a single drawing, will mature on December 31, 2003 and will be repaid in up to 28 consecutive quarterly installments commencing on March 31, 1997, subject to semi-annual borrowing base redeterminations. At Midgard's option, the interest rate applicable to the Midgard Loan will be, until March 31, 1997, either (i) the one-, two- or three-month London Interbank Offered Rate plus a margin of 13/4% or (ii) the Base Rate (to be defined in the credit agreement relating to the Midgard Facility) plus a margin of 3/4% and, thereafter, either (iii) the one-, two- or three-month London Interbank Offered Rate plus a margin of 21/4% or (iv) the Base Rate plus a margin of 11/4%. The Midgard Loan will not be secured but will be guaranteed by YPF and the Company. The agreement evidencing the Midgard Loan will contain, among other things, a negative pledge on all assets of Midgard, subject to customary exceptions. The lenders' obligation to fund the Midgard Loan will be subject to certain conditions as described below. It is anticipated that the Midgard Loan will be repaid with funds generated by Midgard's business operations. Subsidiaries Facility. The Company currently anticipates that on the Purchaser Maturity Date, up to $175 million of the Purchaser Loan will be repaid with funds provided 25 to the Company by Maxus Northwest Java, Inc. ("Java") and Maxus Southeast Sumatra, Inc. ("Sumatra") (collectively, the "Designated Subsidiaries"). The Company anticipates that the Designated Subsidiaries will provide these funds from the proceeds of a loan of up to $175 million (the "Subsidiaries Loan") made to them pursuant to the Subsidiaries Facility. The Subsidiaries Loan will be made in a single drawing on the Purchaser Maturity Date, will mature on December 31, 2002 and will be repaid in up to 24 consecutive quarterly installments commencing on March 31, 1997, subject to semi-annual borrowing base redeterminations. At the option of the Designated Subsidiaries, the interest rates applicable to the Subsidiaries Loan will be, until March 31, 1997, either (i) the one-, two- or three-month London Interbank Offered Rate plus a margin of 21/4% or (ii) the Base Rate (to be defined in the credit agreement relating to the Subsidiaries Facility) plus a margin of 11/4% and, thereafter, either (iii) the one-, two- or three-month London Interbank Offered Rate plus a margin of 23/4% or (iv) the Base Rate plus a margin of 13/4%. The Subsidiaries Loan to Java and Sumatra will be secured by certain of the assets of Java and Sumatra, will be guaranteed by the Company and a new subsidiary formed to hold the stock of Java and Sumatra, and the guarantee by the new holding company will be secured by the stock of Java and Sumatra. The agreement evidencing the Subsidiaries Loan will contain a negative pledge on all of the other assets of the Designated Subsidiaries, subject to customary exceptions. The lenders' obligation to fund the Subsidiaries Loan will be subject to certain conditions as described below. It is anticipated that the Subsidiaries Loan will be repaid with funds generated by the Designated Subsidiaries' business operations. Upon further review of the value of the assets of Midgard and the Designated Subsidiaries, the terms of the Midgard Loan and the Subsidiaries Loan may be modified to provide for intercompany guarantees or other arrangements whereby Midgard and the Designated Subsidiaries provide support for each other's loans. Conditions to Funding. The obligation of the lenders to advance the remaining amount of credit available under the Purchaser Facility is subject to the fulfillment of certain conditions, including but not limited to, (i) the absence of any material adverse change in the condition (financial or otherwise), business, operations, assets or nature of assets or liabilities of (a) YPF and its subsidiaries (taken as a whole), (b) the Purchaser and (c) the Company and its subsidiaries, and (ii) the lenders' satisfaction that the Company will have sufficient cash available to pay the lesser of (a) $134 million or (b) the principal of the Purchaser Loan, interest thereon and other amounts due on the Purchaser Maturity Date under the Purchaser Facility. The obligation of the lenders to fund the Midgard Loan and the Subsidiaries Loan will be subject to certain additional conditions, including without limitation, (i) the effectiveness of the Merger, (ii) the absence of any material adverse change in the condition (financial or otherwise), business, operations, assets or nature of assets or liabilities of (a) YPF and its subsidiaries (taken as a whole), (b) the Company and its subsidiaries (taken as a whole), (c) in the case of the Midgard Loan, Midgard and its subsidiaries (taken as a whole) and (d) in the case of the Subsidiaries Loan, Java or Sumatra or their holding company, (iii) the payment in full of the Purchaser Loan and (iv) all indebtedness and other obligations of each of Midgard, Java and Sumatra to the Company and its other subsidiaries shall have been paid in full or satisfactorily subordinated to the repayment of the Midgard Loan and the Subsidiaries Loan. 26 Prepayment. Each of the Purchaser Loan, the Midgard Loan and the Subsidiaries Loan (collectively, the "Loans") may be prepaid in whole or in part without premium or penalty, except for costs associated with the prepayment of any portion of a Loan bearing interest at a rate determined by reference to the London Interbank Offered Rate prior to the end of any applicable interest period. YPF Guarantee. YPF has guaranteed the repayment of the Purchaser Facility and will guarantee the Midgard Facility and the Subsidiaries Facility. The YPF guarantee of the Purchaser Facility is secured by a pledge of the capital stock of the Purchaser. The guarantee contains certain covenants including a limitation on YPF's debt level and a required level of tangible net worth. Certain Fees. YPF has agreed to pay to Chase customary fees in connection with each of the facilities. Covenant Regarding Financing. In the Merger Agreement, YPF and the Purchaser agreed that they will use their reasonable best efforts to obtain the financings contemplated by the Commitment Letter. AVAILABLE INFORMATION The Company is subject to the information and filing requirements of the Exchange Act and is required to file periodic reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission") relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be described in proxy statements distributed to the Company's stockholders and filed with the Commission. These reports, proxy statements and other information should be available for inspection and copying at the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W. Washington, D.C. 20549. Such material should also be available for inspection at the library of the NYSE, 20 Broad Street, New York, New York 10005 and the Pacific Stock Exchange at 233 South Beaudry Avenue, Los Angeles, California 90012. Certain additional information relating to the Offer, the Merger Agreement, the acquisition by YPF of a controlling equity interest in the Company and the financing thereof and related matters are contained in the Purchaser's Offer to Purchase, dated March 3, 1995, the Schedule 14D-1 and the Solicitation/ Recommendation Statement on Schedule 14D-9 and amendments thereto filed by the Company with the Commission, copies of which are available for inspection (and copies of which may be obtained) at the places and in the manner set forth above (except that such copies will not be available at the regional offices of the Commission). 27 -----END PRIVACY-ENHANCED MESSAGE-----