SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Kerr-McGee Corporation
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
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[X] No fee required
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pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
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<S> <C> <C>
[KERR-MCGEE LOGO] KERR-McGEE CORPORATION
Kerr-McGee Center
P. O. Box 25861
Oklahoma City, Oklahoma 73125
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NOTICE OF ANNUAL MEETING
Time 9:00 a.m. on Tuesday, May 9, 2000
Place Robert S. Kerr Auditorium, Kerr-McGee Center,
123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma
Items of Business 1. Election of 3 Directors each with a term
expiring in 2003
2. Ratification of the appointment of Arthur
Andersen LLP as the Company's independent
public accountant
3. Approval of the 2000 Long Term Incentive Plan
4. Transact such other business as may properly
come before the meeting
Record Date March 10, 2000
Annual Report The 1999 Annual Report, which is not a part of
the proxy solicitation material, has been mailed
along with this Notice and accompanying Proxy
Statement.
Proxy Voting It is important that your shares be represented
and voted at the Annual Meeting. Stockholders
of record may appoint proxies and vote their
shares in one of three ways:
- Via Internet pursuant to the instructions on
the Proxy Card;
- Calling the toll-free number on the enclosed
Proxy Card; or
- Signing, dating and mailing the enclosed
Proxy Card in the envelope provided.
Stockholders whose shares are held by a bank,
broker or other financial intermediary may
appoint proxies and vote as provided by the
intermediary.
Any proxy may be revoked in the manner described
in the accompanying Proxy Statement at any time
prior to its exercise at the meeting.
By Order of the Board of Directors
March 27, 2000 Gregory F. Pilcher
Secretary
KERR-MCGEE CORPORATION
KERR-MCGEE CENTER
P.O. BOX 25861
OKLAHOMA CITY, OKLAHOMA 73125
PROXY STATEMENT FOR THE
2000 ANNUAL MEETING OF STOCKHOLDERS
March 27, 2000
The accompanying proxy is solicited on behalf of the Board of Directors
(the "Board") of Kerr-McGee Corporation (the "Company"). This Proxy Statement
and the accompanying form of proxy are first being mailed to stockholders on
March 27, 2000.
Stockholders of record may appoint proxies and vote their shares in one of
three ways:
1. Via Internet pursuant to the instructions on the Proxy Card;
2. Calling the toll-free number on the enclosed Proxy Card; or
3. Signing, dating and mailing the enclosed Proxy Card in the envelope
provided.
Proxies will be voted as directed, unless revoked before the Annual Meeting
on May 9, 2000, by the stockholder. Any Stockholder who attends the Annual
Meeting and elects to vote in person may revoke the proxy previously submitted
at the meeting. Otherwise, a Stockholder must advise the Corporate Secretary in
writing of the revocation of the proxy. Unless directed otherwise, returned
proxies will be voted for the election of the nominees for director listed below
and on other matters as recommended by the Board of Directors.
Under Section 216 of the Delaware General Corporation Law and the
Kerr-McGee Corporation ByLaws (the "ByLaws"), a majority of the shares of the
common stock, present in person or represented by proxy, shall constitute a
quorum for purposes of the annual meeting. In all matters other than the
election of directors, the affirmative vote of the majority of shares present in
person or represented by proxy at the annual meeting and entitled to vote on the
subject matter shall be the act of the stockholders. Directors shall be elected
by a plurality of the votes present in person or represented by proxy at the
annual meeting and entitled to vote on the election of directors. Abstentions
will have the effect of votes against a proposal, and broker nonvotes have no
effect on the vote.
VOTING SECURITIES
The Company's only class of voting securities is its common stock having a
par value of $1.00 per share (the "Common Stock"), of which there were
94,135,511 shares outstanding as of the close of business on March 10, 2000, the
record date for stockholders entitled to receive notice of and to vote at this
meeting. Each share is entitled to one vote. The number of shares outstanding
does not include shares held in treasury, which will not be voted.
AGENDA FOR ANNUAL MEETING
Three items of business are scheduled for the 2000 Annual Meeting, as
follows:
1. Election of Directors
2. Ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountant
3. Approval of the 2000 Long Term Incentive Plan
All three of these items are discussed below.
The Board of Directors recommends you vote "FOR" each of these items.
Item No. 1
----------
ELECTION OF DIRECTORS
The Board of Directors has nominated Sylvia A. Earle, Martin C. Jischke and
Leroy C. Richie for election as Directors for a term expiring at the 2003 Annual
Meeting and in each case until their respective successors are elected and
qualified. The nominees are currently Directors of the Corporation whose terms
expire at the 2000 Annual Meeting.
The Board of Directors has currently fixed the number of Directors at 12.
The Company's Certificate of Incorporation and ByLaws provide that Directors
shall be divided into three classes serving staggered three-year terms, with
each class to be as nearly equal in number as possible.
None of the nominees are related to any executive officer of the Company,
its subsidiaries, limited liability companies or affiliates. All nominees have
consented to serve, and the Company has no reason to believe any nominee will be
unavailable. Should any nominee become unavailable for any reason, the proxies
will be voted for a substitute nominee to be named by the Board unless the
number of Directors constituting a full board is reduced.
At the Annual Meeting, the stockholders will vote on the election of the
nominees to the Board of Directors. Biographical and other information about
each of the nominees as well as the incumbent directors who are not standing for
reelection is set forth in the proxy materials beginning on page 11 under
"Director Information."
The Board of Directors recommends a vote "FOR" the election to the Board of
each of the nominees.
Item No. 2
----------
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANT
The Board of Directors has appointed Arthur Andersen LLP, an independent
public accounting firm, as the Company's independent public accountant for 2000
in accordance with the recommendation of the Audit Committee. Arthur Andersen
LLP served in the same capacity for the year ended December 31, 1999.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting to make a statement if they desire to do so and will be available to
respond to appropriate questions from stockholders.
At the annual meeting, the stockholders will vote on the ratification of
the appointment of Arthur Anderson LLP as independent public accountant for
2000.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Arthur Andersen LLP.
If the appointment of Arthur Andersen LLP is not ratified by the
stockholders, if Arthur Andersen LLP ceases to act as the Company's independent
accountant, or if the Board of Directors removes Arthur Andersen LLP as the
Company's independent accountant, the Board will appoint another independent
accounting firm. The engagement of a new independent accounting firm for periods
following the 2001 Annual Meeting will be subject to ratification by the
stockholders at that meeting.
Item No. 3
----------
APPROVAL OF THE 2000 LONG TERM INCENTIVE PLAN
The Board of Directors has approved and recommends that the stockholders
vote for the approval of the Kerr-McGee Corporation 2000 Long Term Incentive
Plan (the "2000 Plan") to replace the 1998 Long Term Incentive Plan (the "1998
Plan"). The 2000 Plan adds non-employee directors to those who were eligible for
long term incentive compensation under the 1998 Plan. The Board believes the
2000 plan will enhance the Company's ability to attract and retain outstanding
non-employee directors and employees. The 2000 Plan is designed to ensure that
amounts paid under the Plan qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the applicable regulations.
The Board's recommendation of the 2000 Plan follows a review and evaluation
of the Company's existing compensation plans and a comparison of those plans
with the programs offered by comparable companies. While the 2000 Plan
represents, in part, a continuation of the Company's stock option program, which
has been in effect since 1950, it also provides flexibility in the form and
payment of awards to meet changing business needs.
If the 2000 Plan is approved, the current 1998 Plan will be terminated,
except as to outstanding options and restricted stock, which will remain subject
to the terms of the 1998 Plan. There remain available for grant 1,270,868 shares
of Common Stock under the 1998 Plan. The 2000 Plan would permit total awards up
to 2,500,000 shares of Common Stock, representing an additional 1,229,132 shares
above the number available under the 1998 Plan. The 2000 Plan establishes the
following limits:
(a) Restricted Stock to Employees 450,000 shares
(b) Stock Options and Restricted Stock to non-employee directors, but no more
than 100,000 shares of Restricted Stock 300,000 shares
At the annual meeting the stockholders will vote on the approval of the
2000 Plan.
The Board of Directors recommends a vote "FOR" the approval of the
Kerr-McGee Corporation 2000 Long Term Incentive Plan.
Summary of Plan
Term
The 2000 Plan will be effective as of May 1, 2000, if the Plan is approved
by the stockholders. The 2000 Plan will terminate on April 30, 2010, unless
terminated earlier by the Board of Directors. Termination of the 2000 Plan will
not affect grants made prior to termination, but grants may not be made after
termination.
Administration
The 2000 Plan will be administered by a committee, currently the Executive
Compensation Committee of the Board of Directors, of two or more non-employee
directors appointed by the Board of Directors to administer the Plan (the
"Committee"). Subject to the terms of the 2000 Plan, and to such approvals and
other authority as the Board of Directors may reserve to itself from time to
time, the Committee, consistent with the terms of the 2000 Plan, will have
authority (i) to determine the employees eligible to participate in the 2000
Plan, (ii) to determine the form and terms of grants and awards, and the
conditions and restrictions, if any, subject to which grants and awards will be
made and become payable under the 2000 Plan, (iii) to adopt rules and
regulations with respect to the administration of the 2000 Plan and (iv) to
amend or rescind such rules and regulations and make such other determinations
authorized under the 2000 Plan as the Committee deems necessary or appropriate.
Eligibility
Employees who participate in the 2000 Plan will be selected by the
Committee from among those employees of the Company, its subsidiaries and
limited liability companies who, in the judgment of the Committee, may have a
significant effect on the profitability and growth of the Company. Currently,
the Company estimates approximately 250 employees will be eligible to
participate in the 2000 Plan. Employees who are selected to receive one of the
forms of compensation provided for under the 2000 Plan will not automatically be
selected to receive another form of compensation unless such selection is
specified by the Committee or provided for by the terms of the 2000 Plan. All
non-employee directors will be eligible to participate in the Plan.
Securities Subject To The 2000 Plan
The number of shares of Common Stock which may be issued under the 2000
Plan may not exceed 2,500,000. No more than 450,000 of the 2,500,000 shares
available under the 2000 Plan may be used for grants of restricted stock to
eligible employees. In addition, no more than a total of 300,000 of the
2,500,000 shares under the 2000 Plan may be used for grants of restricted stock
and stock options to non-employee directors, and no more than 100,000 of the
300,000 shares available to non-employee directors may be granted in the form of
restricted stock. If any stock option granted pursuant to the 2000 Plan
terminates, expires or lapses, or any restricted shares of Common Stock granted
pursuant to the 2000 Plan are forfeited, any shares of Common Stock subject to
such option or restricted stock or so forfeited shall again be made available
for grant unless, in the case of stock options granted under the 2000 Plan,
related SARs have been exercised. In the event of any increases or decreases in
the number of issued and outstanding shares of Common Stock, pursuant to stock
splits, mergers, reorganizations, recapitalizations, stock dividends or other
event described under the terms of the 2000 Plan, the Committee shall make
appropriate adjustments to the number of shares subject to grants or awards
previously made to participants, in the exercise price per share of stock
options previously granted to participants and in the number and kinds of shares
which may be distributed under the 2000 Plan. Appropriate adjustments shall also
be made by the Committee in the terms of SARs to reflect any change with respect
to the number of issued and outstanding shares of Common Stock.
Stock Options
The Plan authorizes grants of stock options to non-employee directors and
eligible employees from time to time as determined by the Committee. Subject to
the provisions of the 2000 Plan, the Committee may grant options under the 2000
Plan for such number of shares and having such terms as the Committee shall
designate; however, the maximum number of options that may be granted to any one
optionee is 150,000 per calendar year. Under the terms of the 2000 Plan, the
Committee shall specify whether or not any option is intended to be an incentive
stock option ("Incentive Stock Option") as described in Section 422 of the Code
or a nonstatutory or nonqualified stock option ("Nonqualified Stock Option").
The aggregate value of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an individual during any calendar
year under all Company plans may not exceed $100,000. Each stock option shall
have an exercise price that is not less than the fair-market value of the Common
Stock on the date the option is granted. Nonqualified Stock Options may not be
exercised more than ten years and one day from the date of grant, and Incentive
Stock Options may not be exercised more than ten years from the date of grant.
The Committee may establish dates on which installment portions of an option may
be exercisable during the term of the option. The Committee may also accelerate
the time at which an installment portion of an outstanding option may be
exercisable.
Payment for shares received upon exercise of a stock option may be made in
cash, shares of Common Stock, shares of Common Stock subject to restrictions
under the terms of the 2000 Plan, a combination of the foregoing, through a
cashless exercise with a broker, or in such other manner as the Committee
determines.
In the event an optionee's employment is terminated by reason of disability
or retirement, any outstanding option that was exercisable at the time of such
optionee's disability or retirement shall be exercisable within the period, not
to exceed four years, specified by the Committee. In the event of an optionee's
death while in the employ of the Company or within three months after the
termination of employment, any outstanding option that was exercisable at the
time of the optionee's death shall be exercisable for one year thereafter by the
legal representative of the deceased optionee's estate. Except in the event of
an optionee's death within three months after the termination of employment, an
optionee ceases to be an employee for any reason other than death, disability or
retirement, any outstanding option may not be exercised more than three months
after the date of such event. Under no circumstances will any option be
exercisable after it has terminated or expired.
Because the grant of awards under the 2000 Plan is at the discretion of the
Committee, it is not possible to indicate what awards will be made to persons
eligible for participation in the 2000 Plan.
No options have been granted under the 2000 Plan.
Stock Appreciation Rights
The Plan also authorizes the Committee to affix SARs to stock options
either at the time the option is granted or at any date prior to the option's
expiration. SARs provide an optionee the right to surrender all or a portion of
an option and receive from the Company a payment, in shares of Common Stock,
cash or a combination thereof, equal to the excess of the fair-market value of
the shares of Common Stock for which the SAR is exercised over the aggregate
option exercise price of such shares under the related option at the time of
surrender. In addition, each outstanding SAR will be automatically exercised on
the day prior to the expiration of the related option if the fair-market value
of the Common Stock on such date exceeds the relevant option exercise price.
SARs are exercisable only to the extent that the related options are
exercisable. The exercise of any option will result in an immediate forfeiture
of its related SAR, and the exercise of a SAR will cause an immediate forfeiture
of its related option.
Restricted Stock
The Committee will determine the nature and extent of the restrictions on
such shares, the duration of such restrictions, and any circumstance under which
restricted shares will be forfeited. Restricted shares will be deposited with
the Company during the period of any restriction thereon and, except as
otherwise provided by the Committee during any such period of restriction,
recipients shall have all of the rights of a holder of Common Stock, including
but not limited to voting rights and the right to receive dividends. The
Committee may establish rules concerning the impact of the termination of
employment (by reason of retirement, disability, death or otherwise) or the
applicability of any outstanding restrictions.
Long Term Performance Awards
The 2000 Plan permits the Committee to grant performance awards to eligible
employees under the 2000 Plan from time to time as determined by the Committee.
Performance awards may include performance units (i.e., award units valued by
reference to financial measures or property other than Common Stock) and
performance shares (i.e., award amounts valued by reference to shares of Common
Stock).
Under the terms of the 2000 Plan, the Committee will establish the time
period of not less than one year over which performance will be measured (the
"Performance Period") and the criteria to be used by the Committee to evaluate
the Company's performance with respect to each Performance Period. Such criteria
may include financial or operating measures of the Company, such as return on
equity, return on assets, return on average capital employed, earnings per share
or other criteria as established by the Committee, or may be based on the
Company's performance compared with one or more selected companies. Payment of
earned performance awards may be made to participants in cash, Common Stock,
restricted Common Stock, other property or a combination of the foregoing as
determined by the Committee.
Amendment
The Board may at any time terminate or amend the 2000 Plan in any respect,
except that the Board may not, without further approval of the stockholders of
the Company, amend the 2000 Plan so as to (i) increase the number of shares of
Common Stock which may be issued under the 2000 Plan (except for adjustments in
the number of shares permitted with respect to certain mergers, consolidations
or recapitalizations as described under "Stock Options" above) or change terms
of the 2000 Plan relating to the establishment of the exercise prices under
options granted, (ii) extend the duration of the 2000 Plan beyond April 30,
2010, or (iii) increase the maximum dollar amount of Incentive Stock Options
which an individual optionee may exercise during any calendar year beyond that
permitted in the Code and applicable rules and regulations of the Treasury
Department. No amendment or termination of the 2000 Plan shall, without the
consent of the optionee or participant in the 2000 Plan, alter or impair any of
the rights or obligations under any options or other rights theretofore granted
such person under the 2000 Plan.
Change In Control
In the event of a change in control, any outstanding options or SARs that
have not yet vested shall vest effective as of such date, restrictions on
Restricted Stock shall lapse, and participants who have previously been awarded
performance awards shall earn no less than the participant would have earned if
the performance period terminated as of such date.
A Change in Control means (a) a change in any two year period in a majority
of the Incumbent Directors of the Board of Directors of the Company as defined
in the agreement, (b) with certain exceptions any person becomes the beneficial
owner, directly or indirectly, of 25% or more of the Company's outstanding
Common Stock, (c) with certain exceptions, the consummation of the merger or
consolidation of the Company with any other corporation, or (d) if a majority of
the members of the Board of Directors in office immediately prior to a proposed
transaction determine by written resolution that such proposed transaction, if
taken, will be deemed a Change in Control and such proposed transaction is
effected.
Federal Income Tax Effects
The federal income tax consequences applicable to the Company in connection with
an Incentive Stock Option, Nonqualified Stock Option, SAR, restricted stock or
performance award are complex and depend, in large part, on the surrounding
facts and circumstances. Under current federal income tax laws, a participant
will generally recognize income with respect to a grant of restricted stock,
stock options, SARs or performance awards, as follows:
(a) Payments in respect of performance awards. Any cash and/or the
fair-market value of any Common Stock received as payments in respect of
performance awards under the 2000 Plan will constitute ordinary income to the
employee in the year in which paid, and the Company will be entitled to a
deduction in the same amount.
(b) Incentive Stock Options. The grant of an Incentive Stock Option will
not result in any immediate tax consequences to the Company or the optionee. An
optionee will not realize taxable income, and the Company will not be entitled
to any deduction, upon the timely exercise of an Incentive Stock Option, but the
excess of the fair-market value of the Common Stock acquired over the option
price will be an item of tax preference for purposes of the alternative minimum
tax. If the optionee does not dispose of the Common Stock acquired within one
year after its receipt (or within two years after the date the option was
granted), gain or loss realized on the subsequent disposition of the Common
Stock will be treated as long-term capital gain or loss and the Company will not
be entitled to any deduction. If the optionee disposes of the Common Stock
acquired less than one year after its receipt (or within two years after the
option was granted), the optionee will realize ordinary income in an amount
equal to the lesser of (i) the excess of the fair-market value of the Common
Stock acquired on the date of exercise over the exercise price, or (ii) if the
disposition is a taxable sale or exchange, the amount of any gain realized. Upon
such a disqualifying disposition, the Company will be entitled to a deduction in
the same amount and at the same time as the optionee realizes such ordinary
income. Any amount realized by the optionee in excess of the fair-market value
of the Common Stock on the date of exercise will be taxed to the optionee as
capital gain.
(c) Nonqualified Stock Options. The grant of a Nonqualified Stock Option
will not result in any immediate tax consequences to the Company or the
optionee. Upon the exercise of a Nonqualified Stock Option, the optionee will
generally realize ordinary income. However, an employee who is subject to the
restrictions of Section 16(b) of the Securities Exchange Act of 1934 with
respect to the stock acquired will realize as ordinary income at the time of the
lapse of the restrictions an amount equal to the excess of the fair-market value
of the Common Stock at the time of such lapse over the option price, unless the
employee elects to be taxed on the date of exercise. The Company will be
entitled to a deduction at the same time as, and equal in amount to, the income
realized by the optionee.
(d) Stock Appreciation Rights. Upon the excercise of any SAR, any cash
received and the fair-market value on the date of excercise of any Common Stock
received will constitute ordinary income to the grantee. The Company will be
entitled to a deduction in the same amount and at the same time.
(e) Restricted Stock. A recipient generally will not realize taxable income
upon an award of restricted stock. However, a recipient who receives restricted
stock, either as a grant or in payment of a performance award, will realize as
ordinary income at the time of the lapse of the restrictions an amount equal to
the fair-market value of the Common Stock at the time of such lapse unless the
recipient elects to realize ordinary income on the date of receipt of the
Restricted Common Stock. At the time the recipient realizes ordinary income, the
Company will be entitled to deduct the same amount as the ordinary income
realized by the recipient.
(f) Code Section 162(m). Payments or grants under the 2000 Plan are
intended to qualify as "qualified performance-based compensation" under the Code
and the applicable regulations.
Accounting
During the period that SARs are outstanding, the Company will accrue as an
expense the amount, if any, by which the fair-market value of the Common Stock
exceeds the exercise price of any related option.
DIRECTOR INFORMATION
The following information is furnished for each person who is nominated for
election as a Director or who is continuing as an incumbent Director:
- - Name, age, whether such person is a nominee for election ("Nominee") or an
incumbent Director whose term does not expire at the 2000 Annual Meeting;
- - How long the individual has served as a Director of the Company;
- - The year in which the term is to expire;
- - Principal occupation and employment during the past five years; and
- - The board of directors of other publicly owned companies on which the
Director serves.
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NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS (FOR A TERM ENDING 2003)
<S> <C>
[SYLVIA A. EARLE SYLVIA A. EARLE, 64 - First became a Director in 1999. Chair
PHOTO] of Deep Ocean Exploration and Research, Inc., since 1992 and
Explorer-in-Residence for the National Geographic Society
since 1998; Chair of the Sea Change Trust, a non-profit
scientific research organization, from 1993 to 1995.
[MARTIN C. JISCHKE MARTIN C. JISCHKE, 58 - First became a Director in 1993.
PHOTO] President of Iowa State University since 1991. Director,
Bankers Trust Corporation.
[LEROY C. RICHIE LEROY C. RICHIE, 58 - First became a Director in 1998.
PHOTO] Chairman and Chief Executive Officer of Capitol Coating
Technologies, Inc., since March 1999; President of Intrepid
World Communications from September 1998 to February 1999;
Vice President and General Counsel for Automotive Legal
Affairs, Chrysler Corporation, from 1990 through 1997.
Director, Infiniti, Inc.
</TABLE>
<TABLE>
<CAPTION>
CONTINUING DIRECTORS (TERM EXPIRES AT THE 2001 ANNUAL MEETING)
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[WILLIAM E. WILLIAM E. BRADFORD, 65 - First became a Director in 1999.
BRADFORD PHOTO] Retired, Chairman of the Board of Halliburton Company, a
provider of energy and energy services, from 1998 to January
2000; Chairman and Chief Executive Officer of Dresser
Industries, Inc., now merged with Halliburton Company, from
1996 to 1998; President and Chief Operating Officer of
Dresser Industries, Inc. from 1992 to 1995. Director,
Ultramar/Diamond Shamrock, Inc.
[LUKE R. CORBETT LUKE R. CORBETT, 53 - First became a Director in 1995.
PHOT0] Chairman of the Board and Chief Executive Officer of the
Company since May 1999 and from February 1997 to February
1999; Chief Executive Officer from February to May 1999;
President and Chief Operating Officer from 1995 to 1997;
Group Vice President from 1992 to 1995. Director, OGE Energy
Corp. and BOK Financial Corp.
[DAVID C. DAVID C. GENEVER-WATLING, 54 - First became a Director in
GENEVER-WATLING 1999. Managing Director of SMG Management L.L.C., an
PHOTO] investment firm since 1997; President and Chief Executive
Officer of General Electric Industrial and Power Systems
from 1992 to 1995.
[WILLIAM C. MORRIS WILLIAM C. MORRIS, 61 - First became a Director in 1977.
PHOTO] Chairman of the Board of J. & W. Seligman & Co.,
Incorporated; Chairman of the Board of Tri-Continental
Corporation; and Chairman of the Boards of the companies in
the Seligman family of investment companies, all since
December 1988. Chairman of the Board of Carbo Ceramics, Inc.
since 1987.
[FARAH M WALTERS FARAH M. WALTERS, 55 - First became a Director in 1993.
PHOTO] President and Chief Executive Officer of University
Hospitals Health System, Cleveland, Ohio since 1992.
Director, LTV Corporation and Geon Company.
</TABLE>
<TABLE>
<CAPTION>
CONTINUING DIRECTORS (TERM EXPIRES AT THE 2002 ANNUAL MEETING)
<S> <C>
[TOM J. MCDANIEL TOM J. McDANIEL, 61 - First became a Director in 1997. Vice
PHOTO] Chairman of the Company since February 1997; Senior Vice
President and Corporate Secretary of the Company from 1989
to 1997. Director, UMB Financial Corporation and UMB
Oklahoma Bank.
[JOHN J. MURPHY JOHN J. MURPHY, 68 - First became a Director in 1990.
PHOTO] Managing Director of SMG Management L.L.C., an investment
firm, since January 1997; Chairman of the Board of Dresser
Industries, Inc., hydrocarbon energy products and services,
from 1983 through November 1996; Chief Executive Officer
from 1983 to 1995. Director, Carbo Ceramics, Inc.; PepsiCo
Inc.; W. R. Grace & Co.; and Shaw Industries, Ltd.
[MATTHEW R. MATTHEW R. SIMMONS, 56 - First became a Director in 1999.
SIMMONS PHOTO] President of Simmons & Company International, a specialized
investment banking firm that serves the worldwide energy
service industry, since founding the company in 1974.
[IAN L. IAN L. WHITE-THOMSON, 63 - First became a Director in 1999.
WHITE-THOMSON Executive Director of the Los Angeles Opera since February
PHOTO] 2000; Chairman of the Board of U.S. Borax, Inc., a provider
of borax and borate products, from 1996 to June 1999;
President and Chief Executive Officer from 1988 to 1999;
Chief Executive Officer Rio Tinto Borax Ltd. from 1995 to
June 1999. Director, MG Plc.
</TABLE>
For additional information relating to directors and executive officers,
see "Security Ownership" and "Executive Compensation and Other Compensation."
Board of Directors Meetings, Compensation and Committees
During 1999 the Board held six meetings. Each director attended 75% or more
of the aggregate number of meetings of the Board and the committees of the Board
on which each such director served, except William E. Bradford, David C.
Genever-Watling and Ian L. White-Thomson.
Directors discharge their responsibilities not only by attending Board and
committee meetings but also through communication with the Chairman and other
members of management relative to matters of mutual interest and concern to the
Company. Board members who are not employees of the Company are paid an annual
fee of $30,000, and an additional fee of $1,000 for each Board meeting and
committee meeting attended. Committee Chairs are paid an annual fee of $3,000.
Subject to stockholder approval of the 2000 Plan, annual grants to each Board
member of restricted stock and stock options will be made each year at the first
regular meeting of the Board under the terms specified in the 2000 Plan as
follows: (a) four hundred (400) shares of restricted common stock of Kerr-McGee
Corporation; and (b) two thousand (2,000) options to purchase Kerr-McGee
Corporation common stock. Directors are reimbursed for travel expenses and
lodging.
Pursuant to the 2000 Plan of Deferred Compensation, any director who is not
an employee of the Company may elect to defer any cash compensation until such
person ceases to be a director, after which the deferred compensation, together
with interest, will be paid in ten equal annual installments.
Under the Stock Deferred Compensation Plan for Non-Employee Directors, a
non-employee director may elect to defer compensation through the purchase of
Common Stock on a year-by-year basis by notifying the Company on or before
December 31, of the preceding year. The stock acquired in this nonqualified plan
may not be distributed to the non-employee director until 185 days after the
participant ceases being a director.
The Board has established and currently maintains an Audit Committee, an
Executive Compensation Committee, a Finance Committee, a Nominating Committee
and a Public Responsibility Committee, as standing committees.
The Company initially established the Audit Committee in November 1973. The
Audit Committee continuously has been comprised of independent non-employee
directors. The Company has also begun implementation of the necessary steps to
ensure it complies with the rules promulgated by the Securities and Exchange
Commission and New York Stock Exchange in response to the recommendations of the
Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit
Committees. The Audit Committee meets with the Company's independent public
accountant to review plans for the annual audit and the results of that audit.
The Audit Committee makes recommendations to the full Board regarding the
selection of the Company's independent public accountant. The Audit Committee
also meets with the Vice President of Internal Auditing to review the scope and
results of the Company's internal auditing activities and assessment of the
system of internal controls. The Audit Committee consists of five independent
non-employee directors: David C. Genever-Watling (Chair), William E. Bradford,
Martin C. Jischke, John J. Murphy and Leroy C. Richie. This committee met once
during 1999.
The Executive Compensation Committee reviews the salaries and incentive pay
awards as recommended by the Chief Executive Officer for all officers of the
Company and recommends to the full Board such changes as it may deem
appropriate. The Executive Compensation Committee also administers the Annual
Incentive Compensation Plan, the Long Term Incentive Plan, the Executive
Deferred Compensation Plan and the Supplemental Executive Retirement Plan. The
Executive Compensation Committee recommends but does not fix the cash
compensation of the Chief Executive Officer. The cash compensation of the Chief
Executive Officer is determined by the full Board. The Executive Compensation
Committee consists of all 10 independent non-employee directors: William E.
Bradford (Chair), Sylvia A. Earle, David C. Genever-Watling, Martin C. Jischke,
William C. Morris, John J. Murphy, Leroy C. Richie, Matthew R. Simmons, Farah M.
Walters and Ian L. White-Thomson. This committee met three times in 1999.
The Finance Committee reviews the annual budget and other budget and
financial matters, and makes recommendations to the full Board regarding budget
and finance issues. The Finance Committee consists of five independent
non-employee directors: John J. Murphy (Chair), William E. Bradford, William C.
Morris, Matthew R. Simmons and Ian L. White-Thomson. This committee met once in
1999.
The Nominating Committee recommends nominees to the Board of Directors. The
Nominating Committee will consider recommendations for the position of director
submitted by stockholders in writing in accordance with the Company's ByLaws, to
the Corporate Secretary, Kerr-McGee Corporation, P.O. Box 25861, Oklahoma City,
Oklahoma 73125. A stockholder desiring to make a nomination should contact the
Corporate Secretary to obtain a copy of the ByLaws. See also Stockholder
Proposals on page 26. The Nominating Committee consists of five independent
non-employee directors: William C. Morris (Chair), Sylvia A. Earle, David C.
Genever-Watling, Matthew R. Simmons and Farah M. Walters. Luke R. Corbett serves
as an ex-officio member. This committee did not meet in 1999.
The Public Responsibility Committee reviews corporate governance and other
related corporate issues to develop recommendations to the Board of Directors.
The Public Responsibility Committee consists of five independent non-employee
directors: Leroy C. Richie (Chair), Sylvia A. Earle, Martin C. Jischke, Farah M.
Walters and Ian L. White-Thomson. Gregory F. Pilcher serves as an ex-officio
member. This committee met once in 1999.
Security Ownership
The following table sets forth the number of shares of Common Stock
beneficially owned as of December 31, 1999 by each director and nominee, each of
the executive officers named in the Summary Compensation Table and all directors
and executive officers as a group, and the percentage represented by such shares
of the total Common Stock outstanding on that date:
<TABLE>
<CAPTION>
Number of Shares
Name or Group Beneficially Owned Percent of Class
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
William E. Bradford................ 10,463 *
Luke R. Corbett.................... 282,566 (2)
Sylvia A. Earle.................... 4,554
David C. Genever-Watling........... 9,420
Martin C. Jischke.................. 4,324 (1)
Tom J. McDaniel.................... 87,957 (2)
William C. Morris.................. 41,200
John J. Murphy..................... 1,709 (1)
Leroy C. Richie.................... 2,323
Matthew R. Simmons................. 2,678
Farah M. Walters................... 4,836 (1)
Ian L. White-Thomson............... 7,678
Kenneth W. Crouch.................. 36,267 (2)
John C. Linehan.................... 136,829 (2)
William P. Woodward................ 29,869 (2)
All directors and executive officers
as a group, including those named
above (3).......................... 856,258 (2) *
</TABLE>
* The percentage of shares beneficially owned by any director, nominee or
executive officer, individually or cumulative does not exceed 1%.
(1) Includes shares held by the Stock Deferred Compensation Plan for
Non-Employee Directors.
(2) Includes shares issuable upon the exercise of outstanding stock options
that are exercisable within 60 days of December 31, 1999: 247,000 shares for
Mr. Corbett; 69,533 shares for Mr. McDaniel; 107,866 shares for Mr. Linehan;
28,999 shares for Mr. Crouch; 22,400 shares for Mr. Woodward and 635,192 shares
for all directors and executive officers as a group.
(3) In 1998, stock ownership guidelines were established for the Company's
officers. See Page 24
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table includes individual compensation information on the
Chief Executive Officer and the four other most highly paid executive officers
for services rendered in all capacities for the fiscal years ended December 31,
1999, 1998 and 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation Awards
----------------------------------
No. of
Annual Compensation Securities
------------------- Underlying All Other
Name and Principal Position Year Salary Bonus Options (1) Compensation (2)
- --------------------------- ---- -------- ------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Luke R. Corbett, 1999 $717,500 * 75,000 $43,050
Chairman of the 1998 653,077 215,000 60,000 39,185
Board and Chief 1997 582,212 400,000 50,000 34,933
Executive Officer
Tom J. McDaniel, 1999 336,539 * 20,000 20,192
Vice Chairman of 1998 308,269 70,000 15,000 18,496
the Board 1997 293,077 150,000 16,000 17,585
John C. Linehan, 1999 323,269 * 20,000 19,396
Executive Vice 1998 308,269 70,000 15,000 18,496
President and Chief 1997 295,000 150,000 16,000 17,700
Financial Officer
Kenneth W. Crouch, 1999 293,077 * 17,500 15,877
Senior Vice President, 1998 238,846 50,000 10,000 14,331
Exploration & Production 1997 230,000 115,000 9,000 13,800
William P. Woodward, 1999 291,923 * 17,500 17,515
Senior Vice President, 1998 226,539 50,000 10,000 13,592
Chemical 1997 185,157 100,000 9,000 11,109
* Bonus will be determined in May 2000. See "Report on Executive Compensation"
on Page 22.
</TABLE>
(1) The Company has never granted free-standing Stock Appreciation Rights
("SARs") and has not granted tandem SARs since January 1991.
(2) Consists entirely of 401(k) Company contributions pursuant to the Employee
Stock Ownership Plan and amounts contributed under the nonqualified
benefits restoration plan. Company contributions pursuant to the Employee
Stock Ownership Plan for 1999 were $9,600 each to Messrs. Corbett,
McDaniel, Linehan and Woodward. Mr. Crouch received $7,892. Amounts
contributed under the nonqualified benefits restoration plan for 1999 on
behalf of Messrs. Corbett, McDaniel, Linehan, Crouch and Woodward were:
$33,450, $10,592, $9,796, $7,985 and $7,915, respectively. The amounts
contributed by the Company to the Kerr-McGee Corporation Benefits
Restoration Plan on behalf of such persons are identical to the amounts
that would have been contributed pursuant to the Employee Stock Ownership
Plan except for the Code limitations.
Stock Options
The following table contains information concerning stock options granted
during the fiscal year ended December 31, 1999 to the named executives officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Percent
No. of of Total
Securities Options Per Grant
Underlying Granted to Share Date
Options Employees in Exercise Present
Name Granted (1) Fiscal Year 1999 Price Expiration Date Value(2)
- ------------------- ----------- ---------------- -------- --------------- --------
<S> <C> <C> <C> <C> <C>
Luke R. Corbett 75,000 19.98% $40.2188 January 12, 2009 $657,000
Tom J. McDaniel 20,000 5.31% 40.2188 January 12, 2009 175,200
John C. Linehan 20,000 5.31% 40.2188 January 12, 2009 175,200
Kenneth W. Crouch 17,500 4.64% 40.2188 January 12, 2009 153,300
William P. Woodward 17,500 4.64% 40.2188 January 12, 2009 153,300
</TABLE>
(1) All stock options granted in 1999 were nonqualified stock options. The
exercise price per option is 100% of the fair-market value of a share of Common
Stock on the date of grant. No option expires more than ten years from the date
of grant. At or after the grant of an option, the Executive Compensation
Committee ("Committee") may, in its discretion, grant a participant a SAR. A SAR
is only exercisable during the term of the associated option. No SARs were
granted in 1999, nor have any been granted since 1991. Options may also provide
that, upon a change in control, all options and any accompanying SARs held for
more than six months shall become immediately exercisable in full. A change in
control shall be deemed to have occurred if any person acquires 25% or more of
the outstanding Common Stock, the stockholders approve a merger or consolidation
of the Company with any other corporation, the stockholders approve a complete
liquidation or disposition of all of the Company's assets, or a change in the
majority of the Board of Directors, as described in the Plan, occurs within a
period of 24 months.
(2) The present value was computed in accordance with the Black-Scholes option
pricing model, with assumptions consistent with the Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," as
permitted by the rules of the Securities and Exchange Commission. Based on
Black-Scholes, the value on January 12, 1999, was $8.76 per option. The Company
believes, however, that it is not possible to accurately determine the value of
options at the time of grant using any option pricing model, including
Black-Scholes, since any valuation depends on numerous assumptions. The model
assumes: (a) an expected option term of 5.8 years, (b) interest rate of 4.91%,
which represents the U.S. Treasury Strip Rate at the date of grant with maturity
corresponding to the expected option term, (c) volatility of 23.27% calculated
using monthly stock prices for the 5.8 years prior to the date of the grant, and
(d) dividends at an average annual dividend yield of 3.14%.
Option/SAR Exercises and Holdings
The following table sets forth information for the named executive officers
with respect to options/SARs exercised during 1999 and the value of unexercised
options/SARs held as of December 31, 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs
Shares December 31, 1999 at December 31, 1999 (1)
Acquired On Value --------------------------- ------------------------------
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Luke R. Corbett 4,000 $39,625 185,333 131,667 $1,410,218 $1,727,338
Tom J. McDaniel ----- ----- 52,533 35,334 437,244 459,061
John C. Linehan 10,000 56,407 90,886 35,334 967,125 459,061
Kenneth W. Crouch ----- ----- 16,833 27,167 53,593 396,796
William P. Woodward ----- ----- 13,234 27,167 27,019 396,796
</TABLE>
(1) Options/SARs are "in-the-money" if the fair-market value of the Common Stock
exceeds the exercise price. At December 31, 1999 the closing price of the Common
Stock on the New York Stock Exchange was $62.00.
Retirement Plans
The Company maintains retirement plans for all employees, including
officers. The following table illustrates the pension benefits that may accrue
to executive officers under the Company's retirement plan assuming various
service periods. The table shows the estimated annual pension benefits payable
to a covered participant at normal retirement age under the Company's qualified
defined benefit plan, as well as the nonqualified benefits restoration plan that
provides benefits that would otherwise be denied participants by reason of
certain Code limitations on qualified plan benefits, based on remuneration that
is covered under the plans and years of service with the Company and its
subsidiaries:
<TABLE>
<CAPTION>
RETIREMENT PLAN TABLE
Average Annual 15 Years 20 Years 25 Years 30 Years 35 Years
Compensation Service Service Service Service Service
- -------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 400,000 $ 93,521 $124,694 $155,868 $187,041 $218,215
600,000 141,521 188,694 235,868 283,041 330,215
800,000 189,521 252,694 315,868 379,041 442,215
1,000,000 237,521 316,694 395,868 475,041 554,215
1,200,000 285,521 380,694 475,868 571,041 666,215
</TABLE>
Covered compensation under the retirement plans consists of salary and
bonus as reflected in the Summary Compensation Table plus pretax Section 125 and
401(k) benefit contributions as reflected under All Other Compensation in the
Summary Compensation Table, based on the highest 36 consecutive months over the
previous 120 months prior to retirement. Amounts shown have been computed on a
straight life annuity basis. Benefits payable under the qualified defined
benefit plan are not subject to offset by Social Security benefits. As of
December 31, 1999, Mr. Corbett had 14 years of credited service; Mr. McDaniel,
15; Mr. Linehan, 14; Mr. Crouch, 25; and Mr. Woodward, 27.
Pursuant to the Company's Supplemental Executive Retirement Plan ("SERP"),
certain key senior executives are eligible to receive supplemental retirement
benefits. The SERP is a defined benefit plan and is administered by the
Committee. Management recommends to the Committee employees for participation in
the SERP, and the Committee then selects the participants. Eligible employees
may receive benefits under the SERP upon retirement on or after age 52, subject
to reduction in benefits prior to age 60. Benefits under the SERP equal a
specified percentage of an eligible employee's final average monthly
compensation at retirement in the form of a monthly income for life payable as
an actuarially equivalent tax-equalized lump sum. Generally, the SERP benefit at
retirement is calculated by determining (i) the eligible employee's final
average monthly compensation multiplied by a percentage based on years of
Company service minus (ii) the sum of the anticipated monthly amounts payable to
the eligible employee as a primary Social Security benefit and monthly amounts
payable under the Company's qualified and nonqualified defined benefit plans.
The SERP provisions establish a benefit for employees who were participants
before May 3, 1994, regardless of the years of Company service.
The percentage of final average monthly compensation used to determine the
SERP benefit ranges from 40% to 70%, with benefits depending on when the
executive became a participant in the SERP, the age at which the employee
retires and the reason for the retirement. As of December 31, 1999, the
estimated lump sum SERP benefit payable upon retirement to the executive
officers named in the Summary Compensation Table, assuming (i) retirement at age
60 (age 62 for Mr. McDaniel) and (ii) salaries are maintained at their current
level, is: Mr. Corbett, $4,284,741; Mr. McDaniel, $2,876,590; Mr. Linehan,
$3,133,797; Mr. Crouch, $856,717; and Mr. Woodward, $288,339.
Change in Control Arrangements
Continuity Agreements between the Company and its executive officers and
certain key employees, including Messrs. Corbett, McDaniel, Crouch and Woodward,
provide certain benefits in the event of a qualifying termination that occurs in
connection with a "change in control" of the Company.
In the event of a qualifying termination of employment within two years
after a change in control, such executive will be entitled to receive a lump sum
cash payment equal to three times the executive's annual base salary, bonus and
perquisites. In addition the executive will be entitled to any accrued but
unpaid compensation and additional savings plan contributions for a three-year
period plus the present value of lost pension benefits under the Company's
qualified defined benefit pension plans after giving effect to five years of
credit for age and service in the benefit calculation. The executive also will
be entitled to the continuation of group insurance for up to three years,
outplacement services, and acceleration of vesting of equity and equity-based
awards (unless such acceleration would adversely affect pooling-of-interests
accounting).
If any payments and benefits made and provided to the executive causes the
officer to be subject to an excise tax because the payment is a "parachute
payment" (as defined in the Code), then the payment shall be grossed up to
compensate the executive for any excise tax.
A Change in Control means (a) a change in any two year period in a majority
of the Incumbent Directors of the Board of the Company as defined in the
agreement, (b) with certain exceptions, any person becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's outstanding Common
Stock, (c) with certain exceptions, the consummation of the merger or
consolidation of the Company with any other corporation, or (d) if a majority of
the members of the Board of Directors in office immediately prior to a proposed
transaction determine by written resolution that such proposed transaction, if
taken, will be deemed a Change in Control and such proposed transaction is
effected.
The Company also has made provision under its Benefits Restoration Plan and
the SERP for the crediting of additional years of age and service to certain
executives, including those named in the Summary Compensation Table, whose
employment is terminated under the circumstances described above following a
change in control of the Company.
The merger between the company and Oryx Energy Company constituted a
"change of control" under predecessor change in control agreements that were in
existence on the date of the merger. If, within three years of February 26,
1999, Messers. Corbett, McDaniel or Crouch's employment is terminated by the
Company for any reason other than "cause" as defined, or by the officer for
"good reason," such officer will be entitled to receive a maximum lump sum cash
payment equal to three times the officer's annual base salary. If the payment
made to the officer causes the officer to be subject to an excise tax because
the payment is a "parachute payment" (as defined in the Code), then the payment
shall be reduced to the extent necessary so that no portion thereof is subject
to the excise tax, but only if such reduction increases the net after-tax
benefit received by the officer. In addition, upon such termination, the officer
will be entitled to receive amounts that such officer would otherwise have been
entitled to receive under Kerr-McGee's Supplemental Executive Retirement Plan
(SERP) described more fully in the "Retirement Plans."
In the event of such person's termination of employment within the three
year period for one of the reasons described above, currently the payments under
the agreements in effect on February 26, 1999 will be approximately $2,700,000
for Luke R. Corbett, $1,155,000 for Tom J. McDaniel and $1,200,000 for Kenneth
W. Crouch. Any such payments would be credited against any payments due under
the Continuity Agreements described above.
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee (the "Committee") is comprised of all
of the independent non-employee directors, William E. Bradford, (Chair), Sylvia
A. Earle, David C. Genever-Watling, Martin C. Jischke, William C. Morris, John
J. Murphy, Leroy C. Richie, Matthew R. Simmons, Farah M. Walters and Ian L.
White-Thomson, and is responsible for administering compensation programs that
make it possible for the Company to attract and retain employees with the skills
and attitudes necessary to provide the Company with a fully competitive and
capable management.
The Committee reviews the salaries and incentive pay awards as recommended
by the Chief Executive Officer (the "CEO") for the officers of the Company and
establishes the officers' compensation and the compensation of the CEO. Set
forth below is the report on the Company's executive compensation policies for
1999 and how they affected the Company's CEO and the Company's other officers
(including the four other highest paid officers).
The Company seeks to provide fully competitive levels of total compensation
for its key executives through a mix of base salaries, annual incentive pay,
long term incentives and other benefits. The Committee believes that incentive
or "at risk" compensation is a key ingredient in motivating executive
performance to maximize stockholder value and align executive performance with
company objectives. Total compensation is targeted to be competitive with a peer
group of comparable energy and chemical companies, which includes companies
constituting the S&P Domestic Integrated Oil Index referred to in the
Performance Graph on page 26, as well as other comparable energy and chemical
companies selected with the assistance of an independent consulting firm to be
representative of the Company's size and business activities (the "Comparison
Group"). Since the Company has a substantial amount of its business outside the
United States, its compensation policies must also be internationally
competitive and flexible. This both attracts and retains high quality management
and facilitates global management.
Base Salaries
In determining base salaries for officers, the Committee annually reviews
current competitive market compensation data of the Comparison Group prepared by
an independent consulting firm. Base salaries are typically targeted at the
median of the salary level Comparison Group. The Committee's policy is to set
officers' base salaries at or near the median of base salaries of the Comparison
Group to enable the Company to be competitive and to attract and retain key
executives. When salary increases are made, the Committee also takes into
consideration the individual's performance based on the CEO's evaluation of the
officer's performance, the Committee's evaluation of the CEO's performance and
all officers' current and prior job related experience and tenure. No specific
weight is assigned to any individual factor in determining salary increases.
Annual Incentive Compensation
The Company's Annual Incentive Compensation Plan (the "AICP") provides an
opportunity for officers to earn supplemental incentive compensation each year
depending on the performance of the Company's operating divisions versus the
performance of a peer Comparison Group. Performance thresholds established
annually by the Committee must be achieved before payment of AICP awards.
Under the AICP, an award target is established by the Committee annually
for each executive officer, which in 1999 ranged from 35% of base salary up to
75% of base salary. The executive officer's individual target is based on the
officer's level of responsibility and Comparison Group competitive data, which
the Committee targets at the 50 percentile when determining an executive
officer's award. An executive officer may receive up to 200% of the officer's
award target if performance objectives are exceeded and the officer's
performance excels. The amount of an officer's final award may be reduced or
eliminated by the Committee based on the officer's individual performance.
During 1999, the Company was successful in accomplishing several strategic
and growth goals. On February 26, 1999, Kerr-McGee completed the largest
transaction in its history, merging with Oryx Energy Company. The merger more
than doubled the Company's oil and gas assets and created one of the largest
independent nonintegrated oil and gas exploration and production companies based
in the United States. The Company was successful in achieving the expected $100
million of annualized synergies from the transaction.
The Company continued to expand its worldwide exploration and production
activities. Total production increased nearly 9% to approximately 295,000
barrels of oil equivalent per day, aided in part by the company-operated Janice
field in the North Sea that began production in February 1999, just 17 months
after receiving development approval from the U.K. Department of Trade and
Industry. The Company continued to build its exploratory prospect inventory and
at year end 1999 held interests averaging about 55% in 40 million gross
undeveloped acres. With about 230 blocks in water depth greater than 1,000 feet,
Kerr-McGee is one of the largest leaseholders among independent exploration and
production companies in the deep Gulf of Mexico.
The Company's deepwater exploration activities are also expanding to large,
highly prospective blocks in international basins, in water up to 10,000 feet
deep. Including 1.3 million acres in the Gulf, the Company's worldwide deepwater
inventory totaled approximately 17 million acres at year-end 1999, with
interests averaging approximately 50%. In the North Sea, the Company acquired
additional acreage surrounding the core Gryphon area in Quad 9. The Company also
negotiated and signed a purchase agreement to acquire the North Sea assets of
Repsol S. A. that further enhances this core area. Kerr-McGee closed the Repsol
S. A. transaction in January 2000.
The Company replaced 117% of the 108 million barrels of oil equivalent
produced in 1999. Discoveries and field extension in the North Sea and Indonesia
accounted for much of the 126 million barrels of oil equivalent in proven
reserves added in 1999. Finding and development cost, a key performance measure,
was reduced to $4.88 per oil equivalent barrel in 1999. In addition, the Company
has drilled six successful deepwater wells in the greater Boomvang/Nansen area
and has announced an encouraging discovery in Bohai Bay, China.
The Company continued to expand its world-class titanium dioxide pigment
operations with completion of a 25% expansion of its flagship Hamilton,
Mississippi facility to 188,000 tonnes of annual domestic production capacity.
The Company accomplished the expansion on schedule and within budget.
The Company implemented a cost reduction program at the Hamilton,
Mississippi plant and achieved its goal of realizing cost savings totaling $100
per tonne by year end. The Company won market acceptance of a new universal
grade of pigment and is currently trial testing an additional pigment grade. The
impact of these activities resulted in record operating profit, excluding
special items, of $128 million for the chemical division, up 11% from 1998.
The Company reported 1999 net income before special items of $296 million
and cash flow from operating activities of $713 million. Kerr-McGee's total
return to shareholders was 68.7% in 1999, the highest among its peers in the oil
industry.
Long Term Incentives
With the consent of its stockholders, the Company has for many years
approved the use of Company stock in the form of stock options and restricted
stock awards to provide long-term incentive compensation for the Company's key
executives. The Committee believes that stock compensation establishes a direct
relationship between the compensation of executives and the interest of the
stockholders and is an important retention tool for attracting and retaining key
employees by rewarding management's performance based on objectively measured
results.
Stock ownership guidelines have been established for the Company's
officers. The stock ownership goals are based on the value of the Company's
stock and are expressed in a multiple of the officer's base salary. The
Committee believes that stock ownership by the Company's officers is important
and promotes commitment to the long-term success of Kerr-McGee. The Committee
periodically reviews the guidelines and the officers' stock ownership.
The aggregate value of stock options granted to each officer, including the
CEO, is based on a percentage of the individual's salary. The percentage is set
annually by the Committee after considering surveys and reports by an
independent consulting firm as to competitive awards made within the Comparison
Group, as well as the individual's level of responsibility and a subjective
performance evaluation. In determining the number of options to be granted an
officer, the Committee targets the 50th percentile of competitive data. In
making the 1999 awards, the Committee also considered the amount and terms of
prior awards. The number of stock options granted in 1999 to Mr. Corbett and the
four other highest paid officers is set forth in the Option Grants Table.
The Company's Long Term Incentive Plan was approved by stockholders in 1998
and the Committee expects that all income that may be received through the
exercising of stock options granted in 1999 to officers will qualify as
performance-based compensation as defined
under Section 162(m) of the Code.
Compensation of the Chief Executive Officer
The Chief Executive Officer's compensation is determined in accordance with
the policies described above. In establishing Mr. Corbett's base salary, the
Committee considers competitive salaries of CEOs for comparable energy and
chemical companies within the Comparison Group as compiled by an independent
consulting firm. Mr. Corbett's annual base salary was increased effective
February 1999 to $725,000.
Mr. Corbett's incentive compensation for 2000 will be determined through
the AICP in May 2000. Additionally, the Committee will take into consideration
several substantial accomplishments in 1999, with no specific weight assigned to
any individual accomplishment. Consideration will be given to Mr. Corbett's
significant role in negotiating and completing the Kerr-McGee/Oryx merger, which
was the largest transaction in the Company's history, increasing the Company's
worldwide exploration inventory, negotiating and signing a purchase agreement to
acquire the North Sea assets of Repsol S.A., the excellent performance of the
Company's world-class titanium dioxide pigment operations, and increasing the
total return to stockholders.
Under Mr. Corbett's leadership, the Company reported net income before
special items of $296 million, cash flow from operating activities of $713
million and a total return to shareholders of 68.7%. Kerr-McGee's return on
average equity (excluding merger-related costs) was 19 % in 1999 compared with a
negative return in 1998. Mr. Corbett's role in these significant accomplishments
will be considered for incentive compensation by the Committee in May 2000.
The Committee believes that executive compensation for 1999 appropriately
reflects its policy to align such compensation with overall business strategy,
values and management initiatives and to ensure that the Company's goals and
performance are consistent with the interests of its stockholders.
Federal Income Tax Deductibility
Code Section 162(m) generally limits the corporate deduction on
compensation paid to the Chief Executive Officer and the next four highest paid
officers to $1 million during any fiscal year unless such compensation meets
certain performance-based requirements. At the stockholders' meeting in May
1998, the Company's Annual Incentive Compensation Plan was approved by
stockholders so that "performance-based" compensation generated through this
plan would be considered exempt from the deduction limit.
Submitted by:
Executive Compensation Committee
William E. Bradford, Chairman
Sylvia A. Earle
David C. Genever-Watling
Martin C. Jischke
William C. Morris
John J. Murphy
Leroy C. Richie
Matthew R. Simmons
Farah M. Walters
Ian L. White-Thomson
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total return to stockholders on the Company's Common Stock
against the cumulative total return of the S&P 500 Index and the S&P Domestic
Integrated Oil Index for the five-year period 1995 through 1999.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
KERR-McGEE CORPORATION
S&P 500 INDEX AND S&P DOMESTIC INTEGRATED OIL INDEX
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
Based upon an initial investment of $100 on December 31, 1994
with dividend reinvested
Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99
<S> <C> <C> <C> <C> <C> <C>
Kerr-McGee Corp. $100 $141 $165 $149 $93 $157
S&P 500 $100 $138 $169 $226 $290 $351
S&P Oil Domestic
Integrated Index $100 $114 $144 $171 $139 $173
</TABLE>
STOCKHOLDER PROPOSALS
Stockholder proposals for the 2001 Annual Meeting must be received at the
principal executive offices of the Company no later than November 27, 2000 to be
considered for inclusion in the Proxy Statement and form of proxy relating to
the Annual Meeting in 2001. For any other proposal that a shareholder wishes to
have considered at the Annual Meeting in 2001, the Company must have received
written notice of such proposal during the period beginning February 8, 2001 and
ending February 28, 2001. Proposals which are not received by the dates
specified will be considered untimely. In addition, proposals must comply with
the ByLaws and the rules and regulations of the Securities and Exchange
Commission.
EXPENSE OF SOLICITATION
The cost of this proxy solicitation will be borne by the Company. To assist
in the proxy solicitation, the Company has engaged Georgeson & Co. for a fee of
$13,500 plus out-of-pocket expenses. The Company will reimburse brokers, banks
or other persons for reasonable expenses in sending proxy material to beneficial
owners. Proxies may be solicited through the mail, Internet, telephonic or
facsimile communications or meetings with stockholders or their representatives
by directors, officers and other employees of the Company who will receive no
additional compensation.
OWNERSHIP OF STOCK OF THE COMPANY
To the best of the Company's knowledge, no person beneficially owned more
than 5% of any class of the Company's outstanding voting securities at the close
of business on March 10, 2000, except as set forth below:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership* of Class*
- -------------- ---------------------------------------- --------------------- ---------
<S> <C> <C> <C>
Common Stock AXA Group Entities 5,501,733 (1) 6.4%
Common Stock Capital Research and Management Company 6,695,200 (2) 7.7%
333 South Hope Street
Los Angeles, California 90071
Common Stock Mellon Financial Corporation 4,490,773 (3) 5.19%
One Mellon Center
Pittsburgh, Pennsylvania 15258
Common Stock Morgan Stanley Dean Witter & Co. 4,449,971 (4) 5.15%
1585 Broadway
New York, New York 10036
</TABLE>
*Based on outstanding shares as of December 31, 1999 totaling 86,483,396.
(1) Refers to the following wholly or majority-owned subsidiaries of AXA ("AXA
Group Entities"): Alliance Capital Management L.P., 1345 Avenue of the Americas,
New York, New York 10105; The Equitable Life Assurance Society of the United
States, 1290 Avenue of the Americas, New York, New York 10104; Donaldson, Lufkin
& Jenrette, Inc. (and subsidiaries), 277 Park Avenue, New York, New York 10172;
and Sun Life and Provincial Holdings plc (and subsidiaries), 107 Cheapside,
London EC2V 6DU, United Kingdom. Based on a schedule 13G for the year ended
December 31, 1999.
(a) Sun Life and Provincial Holdings plc has sole power to vote and sole
power to dispose of 526,800 shares, but does not hold any shares over which it
has shared voting or shared disposition power.
(b) Alliance Capital Management L.P. has sole power to vote 1,596,786
shares, sole power to dispose of 4,275,148 shares, and shared power to vote
2,598,153 shares, but holds no shares over which it has shared disposition
power.
(c) The Equitable Life Assurance Society of the United States has sole
power to vote 651,995 shares, shared power to vote 43,900 shares, sole power to
dispose of 695,895 shares, but holds no shares over which it has shared
disposition power.
(2) Based on a Schedule 13G for the year ended December 31, 1999, the Capital
Research and Management Company has sole power to dispose of 6,696,500 shares.
Capital Research and Management Company reports that it holds no shares over
which it has sole voting power or shared voting or shared disposition power.
(3) Based on a Schedule 13G for the year ended December 31, 1999, Mellon
Financial Corporation has sole voting power of 2,322,557 shares, sole power to
dispose over 4,233,078 shares, shared voting power of 94,514 shares, and shared
disposition power of 145,030 shares.
(4) Based on a Schedule 13G for the year ended December 31, 1999, Morgan Stanley
Dean Witter & Co. has shared voting power of 4,410,477 shares and shared
disposition power over 4,449,971 shares. Morgan Stanley Dean Witter & Co.
reports that it holds no shares over which it has sole voting power or sole
disposition power.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than 10% of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission (the "SEC") and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and stockholders
owning more than 10% are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on the information furnished to
the Company and written representations that no other reports were required
during the fiscal year ended December 31, 1999, all applicable Section 16(a)
filing requirements were complied with except that Matthew R. Simmons and Jean
B. Wallace each made a late filing of a Form 4 to report one transaction.
OTHER MATTERS
The Company does not know of any matters to be presented at the meeting
other than those set out in the notice preceding this Proxy Statement. If any
other matters should properly come before the meeting, it is intended that the
persons named on the enclosed proxy will vote said proxy therein at their
discretion.
Gregory F. Pilcher
Secretary
Exhibit A
KERR-McGEE CORPORATION 2000 LONG TERM INCENTIVE PLAN
----------------------------------------------------
Article I
Purpose
-------
The purpose of the 2000 Kerr-McGee Corporation Long Term Incentive Plan
(the "Plan") is to provide incentive opportunities for non-employee directors
and key employees, and to align their personal financial interest with the
Company's stockholders. The Plan includes provisions for stock options, stock
and performance related awards.
Article II
Definitions
-----------
(a) "Award" shall mean the award which a Performance Plan Participant is
entitled to receive under the Performance Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
(d) "Company" shall mean Kerr-McGee Corporation and any successor corporation by
merger or otherwise.
(e) "Committee" shall mean a committee of two (2) or more members of the Board
appointed by the Board of Directors to administer the Plan pursuant to Article
III herein.
(f) "Employee" shall mean any person employed by the Company, a Subsidiary or
Limited Liability Company on a full-time salaried basis, including officers and
employee directors thereof.
(g) "Fair Market Value" of Stock shall mean the average of the highest price and
the lowest price at which Stock shall have been sold on the applicable date as
reported in the Wall Street Journal as New York Stock Exchange Composite
Transactions for that date. In the event that the applicable date is a date on
which there were no such sales of Stock, the Fair Market Value of Stock on such
date shall be the mean of the highest price and the lowest price at which Stock
shall have been sold on the last trading day preceding such date.
(h) "Incentive Stock Option" or "ISO" shall mean an Option grant which meets or
complies with the terms and conditions set forth in Section 422 of the Code and
applicable regulations.
(i) "Indicators of Performance" shall mean the criteria used by the Committee to
evaluate the Company's performance with respect to each Performance Period as
described in Article IX, Section (b) of this Plan.
(j) "Limited Liability Company" or "LLC" shall mean any Limited Liability
Company in which the Company or a Subsidiary owns fifty percent (50%) or more of
the Limited Liability Company.
(k) "Non-Employee Director" shall mean any person duly elected a director of
Kerr-McGee Corporation who is not an employee of the Company.
(l) "Option" or "Stock Option" shall mean a right granted under the Plan to an
Optionee to purchase a stated number of shares of Stock at a stated exercise
price.
(m) "Optionee" shall mean an Employee or Non-Employee Director who has received
a Stock Option granted under the Plan.
(n) "Performance Period" shall mean a period established by the Committee of not
less than one year, at the conclusion of which settlement will be made with a
Performance Plan Participant with respect to the Award.
(o) "Performance Plan Participant" shall mean any eligible Employee so
designated by the Committee.
(p) "Restricted Stock" shall mean Stock which is issued pursuant to Article VIII
of the Plan.
(q) "Restriction Period" shall mean that period of time as determined by the
Committee during which Restricted Stock is subject to such terms, conditions and
restrictions as shall be assigned by the Committee.
(r) "Retirement" shall mean retirement as defined in a policy approved by the
Company.
(s) "Stock" shall mean the common stock of the Company.
(t) "Stock Appreciation Right" or "SAR" shall mean a right granted in connection
with an Option in accordance with Article VII of the Plan.
(u) "Subsidiary" shall mean any corporation (other than the Company) in which
the Company, a Subsidiary or a Limited Liability Company of the Company owns
fifty percent (50%) or more of the total combined voting power of all classes of
stock.
(v) "Total Disability" and "Totally Disabled" shall normally have such meaning
as that defined under the Company's group insurance plan covering total
disability and determinations of Total Disability normally shall be made by the
insurance company providing such coverage on the date on which the employee,
whether or not eligible for benefits under such insurance plan, becomes Totally
Disabled. In the absence of such insurance plan, the Committee shall make such
determination.
Article III
Administration
--------------
Subject to such approvals and other authority as the Board may reserve to
itself from time to time, the Committee shall, consistent with the provisions of
the Plan, from time to time establish such rules and regulations and appoint
such agents as it deems appropriate for the proper administration of the Plan,
and make such determinations under, and such interpretations of, and take such
steps in connection with the Plan or the Options or SARs or the Restricted Stock
Plan or the Performance Plan as it deems necessary or advisable.
Each determination, interpretation, or other action made or taken pursuant
to the Plan by the Committee and/or the Board shall be final and shall be
binding and conclusive for all purposes and upon all persons.
Article IV
Eligibility
-----------
Those Employees who, in the judgment of the Committee, may contribute to
the profitability and growth of the Company, and all Non-Employee Directors,
shall be eligible to receive Options, SARs, grants of Restricted Stock and
Awards under the Plan.
Article V
Maximum Shares Available
------------------------
The Stock to be distributed under the Plan may be either authorized and
unissued shares or issued shares of the Company, but grants of Restricted Stock
shall be made in treasury shares. The maximum amount of Stock which may be
issued under the Plan in satisfaction of exercised Options or SARs, issued as
Restricted Stock or issued under the Long Term Performance Plan shall not
exceed, in the aggregate, two million five hundred thousand (2,500,000) shares
of which no more may be granted, as follows:
(a) Restricted Stock to Employees 450,000 shares
(b) Stock Options and Restricted Stock to 300,000 shares
Non-Employee Directors, but no more
than 100,000 shares to Restricted Stock
Stock subject to an Option which for any reason is cancelled or terminated
without having been exercised, or Stock awarded as Restricted Stock which is
forfeited, shall again be available for grants and Awards under the Plan. Stock
not issued because the holder of any Option exercises the accompanying SAR shall
not again be subject to award by the Committee.
Article VI
Stock Options
-------------
(a) Grant of Options.
(i) The Committee may, at any time and from time to time prior to April 30,
2010, grant Options under the Plan to eligible Employees or Non-Employee
Directors, for such numbers of shares and having such terms as the Committee
shall designate, subject however, to the provisions of the Plan. The Committee
will also determine the type of Option granted (e.g. ISO, nonstatutory, other
statutory Options as from time to time may be permitted by the Code) or a
combination of various types of Options. Options designated as ISOs shall comply
with all the provisions of Section 422 of the Code and applicable regulations.
The aggregate Fair Market Value (determined at the time the Option is granted)
of Stock with respect to which ISOs are exercisable for the first time by an
individual during a calendar year under all plans of the Company, any Subsidiary
and any LLC shall not exceed $100,000. The date on which an Option shall be
granted shall be the date of the Committee's authorization of such grant. Any
individual at any one time and from time to time may hold more than one Option
granted under the Plan or under any other Stock plan of the Company.
(ii) Each Option shall be evidenced by a Stock Option Agreement in such
form and containing such provisions consistent with the provisions of the Plan
as the Committee from time to time shall approve.
(b) Exercise Price. The price at which shares of Stock may be purchased under an
Option shall not be less than 100% of the Fair Market Value of the Stock on the
date the Option is granted.
(c) Option Period. The period during which an Option may be exercised shall be
determined by the Committee; provided, that such period will not be longer than
ten years from the date on which the Option is granted in the case of ISOs, and
ten years and one day in the case of other Options. The date or dates on which
installment portion(s) of an Option may be exercised during the term of an
Option shall be determined by the Committee and may vary from Option to Option.
The Committee may also determine to accelerate the time at which installment
portion(s) of an outstanding Option may be exercised.
(d) Termination of Employment. An Option shall terminate and may no longer be
exercised three months after the Optionee ceases to be an Employee for any
reason other than Total Disability, death or Retirement. If an Optionee's
employment is terminated by reason of Total Disability or Retirement the vesting
provision will lapse and such Option may be exercised within the period, not to
exceed four years following such termination, specified by the Committee in the
instrument evidencing the Option. If the Optionee dies while in the employ of
the Company, a Subsidiary or LLC, or within three months after the termination
of such employment, the vesting provisions will lapse and such Option may,
within the lesser of one year after the Optionee's death or the term of the
option, be exercised by the legal representative of the Optionee's estate, or if
it has been distributed as part of the estate, by the person or persons to whom
the Optionee's rights under the Option shall pass by will or by the applicable
laws of descent and distribution. In no event may an Option be exercised to any
extent by anyone after the expiration or termination of the Option.
(e) Payment for Shares.
(i) The exercise price of an Option shall be paid to the Company in full at
the time of exercise at the election of the Optionee (1) in cash, (2) in shares
of Stock having a Fair Market Value equal to the aggregate exercise price of the
Option and satisfying such other requirements as may be imposed by the
Committee, (3) in shares of Restricted Stock having a Fair Market Value equal to
the aggregate exercise price of the Option and satisfying such other
requirements as may be imposed by the Committee, (4) partly in cash and partly
in such shares of Stock or Restricted Stock, (5) to the extent permitted by the
Committee, through the withholding of shares of Stock (which would otherwise be
delivered to the Optionee) with an aggregate Fair Market Value on the exercise
date equal to the aggregate exercise price of the Option or (6) through the
delivery of irrevocable instructions to a broker to deliver promptly to the
Company an amount equal to the aggregate exercise price of the Option. The
Committee may limit the extent to which shares of Stock or shares of Restricted
Stock may be used in exercising Options. No Optionee shall have any rights to
dividends or other rights of a stockholder with respect to shares of Stock
subject to an Option until the Optionee has given written notice of exercise of
the Option, paid in full for such shares of Stock and, if applicable, has
satisfied any other conditions imposed by the Committee pursuant to the Plan.
(ii) If shares of Restricted Stock are used to pay the exercise price of an
Option, an equal number of shares of Stock delivered to the Optionee upon
exercise of an Option, shall be subject to the same restrictions for the
remainder of the Restriction Period.
(f) Annual Maximum Performance. Options granted to any one Optionee may not
exceed one hundred fifty thousand (150,000) shares of stock per calendar year.
Article VII
Stock Appreciation Rights
-------------------------
(a) Grant. The Committee may affix SARs to an Option, either at the time of its
initial granting to the Optionee or at a later date. The addition of such SARs
must be accomplished prior to the completion of the period during which the
Option may be exercised and such exercise period may not be extended beyond that
which was initially established. The Committee may establish SAR terms and
conditions at the time such SAR is established.
(b) Exercise.
(i) A SAR shall be exercisable at such time as may be determined by the
Committee and a SAR shall be exercisable only to the extent that the related
Option could be exercised. Upon the exercise of a SAR, that portion of the
Option underlying the SAR will be considered as having been surrendered. A SAR
shall be automatically exercised at the end of the last business day prior to
the stated expiration date of the unexercised portion of the related Option if
on such date the Fair Market Value of Stock exceeds the Option exercise price
per share.
(ii)The Committee may impose any other conditions upon the exercise of a
SAR, consistent with the Plan, which it deems appropriate. Such rules and
regulations may govern the right to exercise SARs granted prior to the adoption
or amendment of such rules and regulations as well as SARs granted thereafter.
(iii) Upon the exercise of a SAR, the Company shall give to an Optionee an
amount (less any applicable withholding taxes) equivalent to the excess of the
Fair Market Value of the shares of Stock for which the right is exercised on the
date of such exercise over the exercise price of such shares under the related
Option. Such amount shall be paid to the Optionee either in cash or in shares of
Stock or both as the Committee shall determine. Such determination may be made
at the time of the granting of the SAR and may be changed at any time
thereafter. No fractional shares of Stock shall be issued and the Committee
shall determine whether cash shall be given in lieu of such fractional share or
whether such fractional share shall be eliminated.
(c) Expiration or Termination.
(i) Subject to (c)(ii), each SAR and all rights and obligations thereunder
shall expire on a date to be determined by the Committee.
(ii)A SAR shall terminate and may no longer be exercised upon the exercise,
termination or expiration of the related Option.
Article VIII
Restricted Stock Plan
---------------------
(a) At the time of making a grant of Restricted Stock or making payment of an
Award in Restricted Stock to an Employee or Non-Employee Director, the Committee
shall establish a Restriction Period and assign such terms, conditions and other
restrictions to the Restricted Stock as it shall determine applicable to the
Restricted Stock to be issued in settlement of such grant or Award.
(b) Restricted Stock will be represented by a Stock certificate registered in
the name of the Restricted Stock recipient. Such certificate, accompanied by a
separate duly endorsed stock power, shall be deposited with the Company. The
recipient shall be entitled to receive dividends during the Restriction Period
and shall have the right to vote such Restricted Stock and all other
stockholder's rights, with the exception that (i) the recipient will not be
entitled to delivery of the Stock certificate during the Restriction Period,
(ii) the Company will retain custody of the Restricted Stock during the
Restriction Period and (iii) a breach of the terms and conditions established by
the Committee pursuant to the Award will cause a forfeiture of the Restricted
Stock. Subject to Article VI, Section (e), Restricted Stock may be used to
exercise Options. The Committee may, in addition, prescribe additional
restrictions, terms and conditions upon or to the Restricted Stock.
(i) Termination of Employment. The Committee may establish such rules
concerning the termination of employment of a recipient of Restricted Stock
prior to the expiration of the applicable Restriction Period as it may deem
appropriate from time to time.
(ii)Restricted Stock Agreement. Each grant of, or payment of an Award in,
Restricted Stock shall be evidenced by a Restricted Stock Agreement in such form
and containing such terms and conditions not inconsistent with the provisions of
the Plan as the Committee from time to time shall approve.
(c) The Committee shall not grant Restricted Stock in excess of four hundred
fifty thousand (450,000) shares of Stock during the term of this Agreement.
Article IX
Performance Plan
----------------
(a) Administrative Procedure. The Committee shall designate Employees as
Performance Participants to become eligible to receive Awards under the plan and
shall establish Performance Periods under the Performance Plan.
(b) Indicators of Performance. The Committee shall establish Indicators of
Performance applicable to the Performance Period. Indicators of Performance are
utilized to determine amount and timing of Awards, and may vary between
Performance Periods. Indicators of Performance may include, but shall not be
limited to, various financial and operating measures, and may be based on the
Company's performance compared to one or more selected companies during the same
Performance Period or may be related solely to the Company's performance during
the Performance Period, or a combination of such indicators. The Committee may
take into consideration, and make appropriate adjustments for, events occurring
during the Performance Period which the Committee concludes have affected the
performance of the Company or any selected company with respect to any of the
Indicators of Performance.
(c) Award Adjustment. Subject to the terms of the Plan, the Committee may make
adjustments in Awards to Performance Plan Participants.
(d) Performance Awards. Awards may be in the form of performance shares, which
are units valued by reference to shares of stock or performance units, which are
units valued by reference to financial measures or property other than stock and
shall be subject to such terms and conditions and other restrictions as the
Committee shall assign. At the time of making grants of Awards, the Committee
shall establish such terms and conditions as it shall determine applicable to
such Awards. Awards may be paid out in cash, Stock, Restricted Stock, other
property or combination thereof. Recipients of Awards are not required to
provide consideration other than the rendering of service.
(e) Partial Performance Period Participation. The Committee shall determine the
extent to which an Employee shall participate in a partial Performance Period
because of becoming eligible to be a Performance Plan Participant after the
beginning of such Performance Period.
Article X
Adjustment Upon Changes In Stock
--------------------------------
The number of shares of Stock which may be issued pursuant to this Plan,
the number of shares covered by each outstanding Option, the Option exercise
price per share, the number of shares granted as Restricted Stock, and the
number of shares representing a Performance Plan Participant's Award under the
Performance Plan, shall be adjusted proportionately, and any other appropriate
adjustments shall be made, for any increase or decrease in the total number of
issued and outstanding Stock (or change in kind) resulting from any change in
the Stock or Options through a merger, consolidation, reorganization,
recapitalization, subdivision or consolidation of shares or other capital
adjustment or the payment of a Stock Dividend or other increase or decrease (or
change in kind) in such shares. In the event of any such adjustment, fractional
shares shall be eliminated. Appropriate adjustment shall also be made by the
Committee in the terms of SARs to reflect the foregoing changes.
Article XI
Change In Control
-----------------
Notwithstanding anything to the contrary in the Plan, in the event of a Change
in Control:
(i) If during a Restriction Period(s) applicable to Restricted Stock issued
under the Plan, all restrictions imposed hereunder on such Restricted Stock
shall lapse effective the date of the Change in Control;
(ii) If during a Performance Period(s) applicable to an Award granted under the
Plan, a Participant shall earn no less than the number of performance shares or
performance units which the participant would have earned if the Performance
Period(s) had terminated as of the date of the Change in Control; or
(iii) Any outstanding Options or SARs that are not exercisable shall become
exercisable effective as of the date of a Change in Control. If an Optionee's
employment is terminated within 24 months of the effective date of a Change in
Control, to the extent that any Option was exercisable at the time of the
Optionee's termination of employment, such Option may be exercised within four
years following the date of termination of employment.
For purposes of the Plan, a "Change in Control" shall be deemed to have
occurred if:
(a) Any person ("Person") as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section
13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the
Exchange Act, but excluding the Company and any subsidiary and any employee
benefit plan sponsored or maintained by the Company or any subsidiary (including
any trustee of such plan acting as trustee), directly or indirectly, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities (other than indirectly as a result
of the Company's redemption of its securities); or
(b) The consummation of any merger or other business combination of the Company,
sale of 50% or more of the Company's assets, liquidation or dissolution of the
Company or combination of the foregoing transactions (the "Transaction(s)")
other than a Transaction immediately following which the shareholder of the
Company and any trustee or fiduciary of any Company employee benefit plan
immediately prior to the Transaction own at least 60% of the voting power,
directly or indirectly, of (A) the surviving corporation in any such merger or
other business combination; (B) the purchaser or successor to the Company's
assets; (C) both the surviving corporation and the purchaser in the event of any
combination of Transactions; or (D) the parent company owning 100% of such
surviving corporation, purchaser or both the surviving corporation and the
purchaser, as the case may be; or
(c) Within any twenty-four month period, the persons who were directors
immediately before the beginning of such period (the "Incumbent Directors")
shall cease (for any reason other than death) to constitute at least a majority
of the Board or the board of directors of a successor to the Company. For this
purpose, any director who was not a director at the beginning of such period
shall be deemed to be an Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval of, at least
two-thirds of the directors who then qualified as Incumbent Directors (so long
as such director was not nominated by a person who commenced or threatened to
commence an election contest or proxy solicitation by or on behalf of a Person
(other than the Board) or who has entered into an agreement to effect a Change
in Control or expressed an intention to cause such a Change in Control); or
(d) A majority of the members of the Board of Directors in office immediately
prior to a proposed Transaction determine by a written resolution that such
proposed Transaction, if taken, will be deemed a Change in Control and such
proposed Transaction is consummated.
Article XII
Miscellaneous
-------------
(a) Except as otherwise required by law, no action taken under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
thrift, profit sharing, group insurance or other benefit plan maintained by the
Company or any Subsidiaries, unless such other plan specifically provides for
such inclusion.
(b) Employees may elect to defer the gain from any award under this Plan under
the terms and conditions of the Kerr-McGee Corporation Executive Deferred
Compensation Plan.
(c) Except as provided in Section (d) of this Article XII, no Option or SAR,
grant of Restricted Stock or Award under this Plan shall be transferable other
than by will or the laws of descent and distribution. Any Option or SAR shall be
exercisable (i) during the lifetime of an Optionee, only by the Optionee or, to
the extent permitted by the Code, by an appointed guardian or legal
representative of the Optionee, and (ii) after death of the Optionee, only by
the Optionee's legal representative or by the person who acquired the right to
exercise such Option or SAR by bequest or inheritance or by reason of the death
of the Optionee.
(d) The Committee may, in its discretion, authorize all or a portion of the
Options to be granted to an Optionee to be on terms which permit transfer by
such Optionee to an immediate family member of the Optionee who acquires the
options from the Optionee through a gift or a domestic relations order. For
purposes of this Section (d), "family member" includes any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, trusts for the exclusive benefit of these
persons and any other entity owned solely by these persons, provided that the
Stock Option Agreement pursuant to which such Options are granted must be
approved by the Committee and must expressly provide for transferability in a
manner consistent with this Section and provided further that subsequent
transfers of transferred options shall be prohibited except those in accordance
with Section (c) of this Article XII. Following transfer, any such options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. The events of termination of employment of
Section (d) of Article VI hereof shall continue to be applied with respect to
the original Optionee, following which the options shall be exercisable by the
Transferee only to the extent and for the periods specified in Section (d) of
Article VI.
(e) The Company shall have the right to withhold from any settlement hereunder
any federal, state, or local taxes required by law to be withheld, or require
payment in the amount of such withholding. If settlement hereunder is in the
form of Stock, such withholding may be satisfied by the withholding of shares of
Stock by the Company, unless the Optionee shall pay to the Company an amount
sufficient to cover the amount of taxes required to be withheld, and such
withholding of shares does not violate any applicable laws, rules or regulations
of federal, state or local authorities.
(f) Transfer of employment between the Company, a Subsidiary or Limited
Liability Company, or between Limited Liability Companies and Subsidiaries shall
not constitute termination of employment for the purpose of the Plan. Whether
any leave of absence shall constitute termination of employment for the purposes
of the Plan shall be determined in each case by the Committee.
(g) All administrative expenses associated with the administration of the Plan
shall be borne by the Company.
(h) The titles and headings of the articles in this Plan are for convenience of
reference only and in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.
(i) No grant or Award to an employee under the Plan or any provisions thereof
shall constitute any agreement for or guarantee of continued employment by the
Company and no grant or Award to a Non-Employee Director shall constitute any
agreement for or guarantee of continuing as a Non-Employee Director.
(j) The Committee shall have such duties and powers as may be necessary to
discharge its responsibilities under this Plan, including, but not limited to,
the ability to construe and interpret the Plan and resolve any ambiguities with
respect to any of the terms and provisions hereof as written and as applied to
the operation of the Plan.
Article XIII
Amendment And Termination
-------------------------
The Board may at any time terminate or amend this Plan in such respect as
it shall deem advisable, provided, the Board may not, without further approval
of the stockholders of the Company, amend the Plan so as to (i) increase the
number of shares of Stock which may be issued under the Plan, except as provided
for in Article X, or change Plan provisions relating to establishment of the
exercise prices under Options granted, (ii) extend the duration of the Plan
beyond the date approved by the stockholders or (iii) increase the maximum
dollar amount of ISOs which an individual Optionee may exercise during any
calendar year beyond that permitted in the Code and applicable rules and
regulations of the U.S. Treasury Department. No amendment or termination of the
Plan shall, without the consent of the Optionee or Plan participant, alter or
impair any of the rights or obligations under any Options or other rights
theretofore granted such person under the Plan.
Article XIV
Duration Of The Plan
--------------------
The effective date of this Plan shall be May 1, 2000. If not sooner
terminated by the Board, this Plan shall terminate on April 30, 2010, but
Options and other rights theretofore granted and any Restriction Period may
extend beyond that date and the terms of the Plan shall continue to apply.
March 27, 2000
To: Participants In The Kerr-McGee Corporation
SAVINGS INVESTMENT PLAN and/or the
EMPLOYEE STOCK OWNERSHIP PLAN Dated September 12, 1989:
As a participant in the Kerr-McGee Corporation Savings Investment Plan ("SIP")
and/or the Kerr-McGee Corporation Employee Stock Ownership Plan dated September
12, 1989 ("ESOP"), you owned shares of Common Stock of the Company on March 10,
2000, the record date for stockholders entitled to vote at the annual
stockholders' meeting to be held on May 9, 2000. This stock is held in trust by
Putnam Fiduciary Trust Company, as Trustee for the SIP and State Street Bank and
Trust Company, as Trustee for the ESOP.
Each plan provides that the shares of Common Stock of the Company which have
been allocated to your account will be voted by the Trustees in accordance with
your instructions. Both the SIP and ESOP provide that shares allocated to
participants for which no Voting Instructions are received shall be voted by the
Trustees in the same proportion as those allocated shares for which instructions
are received. The ESOP also provides that shares which have not yet been
allocated (approximately 700,000 shares) shall also be voted by the Trustees in
the same proportion as those allocated shares for which instructions are
received.
Your vote is important and you are urged to vote promptly! If the Trustees do
not receive Voting Instructions from you, the shares in both plans for which no
instructions are received and the unallocated shares in the ESOP will be voted
in the same proportion as the total shares for which instructions are received
by the Trustees.
Enclosed for your information and use are the following:
1. Notice of the Annual Meeting and Proxy Statement. (Since your shares
will be voted through the Trustees, the enclosed Voting Instructions
replace the Proxy referred to in the Proxy Statement.)
2. Voting Instructions to the Trustee for each plan for your use in
directing the Trustees to vote your shares.
3. A postage-paid, self-addressed envelope for your use in returning your
Voting Instructions to UMB BANK N.A. which will tabulate the Voting
Instructions for each Trustee.
Very truly yours,
KERR-McGEE CORPORATION
BENEFITS COMMITTEE
By:______________________
John M. Rauh, Chairman
VOTING INSTRUCTIONS!!! VOTING INSTRUCTIONS!!!
If you vote the shares of Common Stock you hold in the SIP and ESOP in the same
manner, you may vote these shares through the Internet or by Telephone, as
follows:
VOTE BY INTERNET
Your Internet vote is quick, convenient and your vote is immediately submitted.
Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Visit our Internet Voting site at http://www.umb.com/proxy and follow the
instructions on the screen.
Please note that all votes cast by Internet must be submitted prior to 5:00 p.m.
Central Time, May 8, 2000.
Your Internet vote authorizes the named proxies to vote your shares to the same
extent as if you marked, signed, dated and returned your Voting Instructions.
If you vote by Internet, please do not return your Voting Instructions by mail.
VOTE BY TELEPHONE
Your Telephone vote is quick, easy and immediate. Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Using a Touch-Tone Telephone, call Toll Free 1-800-758-6973 and follow the
instructions for voting a proxy.
3. When instructed, enter the Control Number, which is located in the lower
right hand corner on the reverse side of the Voting Instructions to the
Trustees.
Your telephone vote authorizes the named proxies to vote your shares to the same
extent as if you marked, signed, dated and returned your Voting Instructions.
If you vote by telephone, please do not return your Voting Instructions by mail.
VOTE BY MAIL
To vote by mail, complete, sign and date the Voting Instructions and return it
TODAY in the envelope provided herein.
VOTING INSTRUCTIONS TO THE TRUSTEES
-----------------------------------
For Annual Stockholders' Meeting Of
Kerr-McGee Corporation
To Be Held On May 9, 2000
Putnam Fiduciary Trust Company, Trustee State Street Bank and Trust
Kerr-McGee Corporation Company, Trustee
Savings Investment Plan Kerr-McGee Corporation
859 Willard Street Employee Stock Ownership Plan
Quincy, Massachusetts 02269-9110 P. O. Box 1994
Boston, Massachusetts 02101
I hereby direct that all my shares of Kerr-McGee Corporation Common Stock
("Common Stock"), the voting of which I am entitled to direct pursuant to the
Kerr-McGee Corporation Savings Investment Plan ("SIP") and the Kerr-McGee
Corporation Employee Stock Ownership Plan ("ESOP"), be voted by Putnam Fiduciary
Trust Company (as Trustee of the SIP) and State Street Bank and Trust Company
(as Trustee of the ESOP) at the Annual Meeting Of Stockholders on May 9, 2000.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE "FOR" ITEMS 1, 2 and 3
SIP ESOP
1. ELECTION OF DIRECTORS: _____ FOR _____ FOR
(01) Sylvia A. Earle; _____ WITHHOLD _____ WITHHOLD
(02) Martin C. Jischke; and _____ WITHHOLD for the _____WITHHOLD for the
(03) Leroy C. Richie following only, write following only, write
name(s) name(s)
_____________________ _____________________
_____________________ _____________________
2. Ratify the appointment of Arthur _____ FOR _____ FOR
Andersen LLP as the Company's _____ AGAINST _____ AGAINST
independent public accountant. _____ ABSTAIN _____ ABSTAIN
3. Approve the 2000 Long Term _____ FOR _____ FOR
Incentive Plan _____ AGAINST _____ AGAINST
_____ ABSTAIN _____ ABSTAIN
The Trustees are authorized to grant the Proxies authority to vote in their
discretion upon such other business as may properly come before the meeting.
Because the SIP and ESOP are separate plans, you are entitled to vote separately
the shares of Kerr-McGee Corporation Common Stock you hold in each Plan.
Please sign below. The Trustee will vote your shares as you direct. If you sign
below, but do not give any instructions or give partial instructions with
respect to either the SIP or the ESOP, the Trustee for the Plan will vote FOR
Items 1, 2 and 3. Please sign exactly as your name appears in the address.
If you do not return voting instructions to the Trustees, the shares for which
no instructions are received will be voted in the same proportion by each
Trustee as the total shares for which instructions are received by such Trustee.
- ------------------------- ------------------------ --------------
Signature of Participant Social Security Number Date
