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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NO. 1-8968
ANADARKO PETROLEUM CORPORATION
17001 NORTHCHASE DRIVE, HOUSTON, TEXAS 77060-2141
TELEPHONE: (281) 875-1101
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INCORPORATED IN THE STATE OF DELAWARE EMPLOYER IDENTIFICATION NO. 76-0146568
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock, par value $0.10 per share
Preferred Stock Purchase Rights
The above Securities are listed on the New York Stock Exchange.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No____.
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X .
The aggregate market value of the voting stock held by non-affiliates of
the registrant on January 30, 1998 was $3,549,075,000.
The number of shares outstanding of each of the registrant's classes of
common stock as of January 30, 1998 is shown below:
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TITLE OF CLASS NUMBER OF SHARES OUTSTANDING
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Common Stock, par value $0.10 per 59,899,994
share
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PART OF
FORM 10-K DOCUMENTS INCORPORATED BY REFERENCE
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Part I Portions of the Anadarko Petroleum Corporation 1997 Annual
Report to Stockholders.
Part III Portions of the Proxy Statement, dated March 23, 1998, for
the Annual Meeting of Stockholders of Anadarko Petroleum
Corporation to be held April 30, 1998.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business 2
General 2
Proved Reserves and Future Net Cash Flows 2
Exploration and Development Activities 3
Volumes and Prices 3
Properties and Activities -- United States 4
Properties and Activities -- International 10
Drilling Programs 14
Drilling Statistics 14
Productive Wells 15
Employees 15
Regulatory and Legislative Developments 15
Additional Factors Affecting Business 15
Title to Properties 15
Capital Spending 15
Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed
Charges and Preferred Stock Dividends 16
Item 2. Properties 16
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 18
Executive Officers of the Registrant 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 20
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of Financial Condition
and
Results of Operations 21
Item 8. Financial Statements and Supplementary Data 34
Item 9. Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure 69
PART III
Item 10. Directors and Executive Officers of the Registrant 69
Item 11. Executive Compensation 69
Item 12. Security Ownership of Certain Beneficial Owners and
Management 69
Item 13. Certain Relationships and Related Transactions 69
PART IV
Item 14. Exhibits and Reports on Form 8-K 70
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PART I
ITEM 1. BUSINESS
GENERAL
Anadarko Petroleum Corporation is one of the world's largest independent
oil and gas exploration and production companies with 708 million energy
equivalent barrels (EEBs) of proved reserves as of December 31, 1997.
The Company's reserve mix has shifted dramatically in recent years,
primarily due to major crude oil discoveries both in the U.S. and Algeria, which
have resulted in a larger and more balanced portfolio of energy reserves. As of
year-end 1997, crude oil, condensate and natural gas liquids (NGLs) reserves
accounted for 59 percent of the Company's total reserves compared to just six
percent at year-end 1986.
About 74 percent of the Company's proved reserves is located in the U.S.,
primarily in the mid-continent (Kansas, Oklahoma and Texas) area, offshore in
the Gulf of Mexico and in Alaska. At year-end 1997, all of the Company's
production was located in the U.S. The Company also owns and operates gas
gathering assets in its U.S. core producing areas.
Internationally, Anadarko is exploring for and developing crude oil
reserves in Algeria's Sahara Desert. To date, the Company has recorded 184.1
million barrels (MMBbls) of proved crude oil reserves in Algeria, which accounts
for 26 percent of Anadarko's total proved reserves. First oil production from
the Hassi Berkine South (HBNS) Field is expected in May 1998. Development of
other commercial fields in Algeria is also underway. The Company is also
participating in other exploration projects in Eritrea, Jordan, Peru, the North
Atlantic Margin and Tunisia.
The principal subsidiaries of Anadarko include: Anadarko Algeria
Corporation (Anadarko Algeria); Anadarko Energy Services Company; and, Anadarko
Gathering Company. Unless the context otherwise requires, the terms "Anadarko"
or "Company" refer to Anadarko and its subsidiaries. The Company's corporate
offices are located at 17001 Northchase Drive, Houston, Texas 77060-2141, where
the telephone number is (281) 875-1101.
PROVED RESERVES AND FUTURE NET CASH FLOWS
Proved oil and gas reserves are the estimated quantities of natural gas,
crude oil, condensate and NGLs which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Reserves are
considered proved if economical productibility is supported by either actual
production or conclusive formation tests. Reserves which can be produced
economically through application of improved recovery techniques are included in
the "proved" classification when successful testing by a pilot project or the
operation of an installed program in the reservoir provides support for the
engineering analysis on which the project or program was based.
Proved developed oil and gas reserves can be expected to be recovered
through existing wells, with existing equipment and operating methods.
As of December 31, 1997, Anadarko had proved reserves of 1.73 trillion
cubic feet (Tcf) of natural gas and 419.7 MMBbls of crude oil, condensate and
NGLs. Combined, these proved reserves are equivalent to 708 MMBbls of oil or 4.2
Tcf of gas. The Company's reserves have grown significantly over the past three
years. Reserve growth is due mainly to the dramatic increase in crude oil
reserves discovered in Algeria, the Gulf of Mexico and Alaska. Crude oil,
condensate and NGLs comprised 59 percent of Anadarko's total reserves at
year-end 1997, up from 50 percent at year-end 1996.
Proved developed reserves comprise 55 percent of the total proved reserves
on an energy equivalent barrel basis. As of December 31, 1997, Anadarko had
proved developed reserves of 1.6 Tcf of natural gas and 122.6 MMBbls of crude
oil, condensate and NGLs.
The Company's estimates of proved reserves and proved developed reserves
owned at December 31, 1997, 1996 and 1995 and changes in proved reserves during
the last three years are contained in the Supplemental Information on Oil and
Gas Exploration and Production Activities (Supplemental Information) in the
Anadarko Petroleum Corporation 1997 Consolidated Financial Statements
(Consolidated Financial Statements) under Item 8 of this Form 10-K Annual Report
(Form 10-K). The Company files
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annual estimates of certain proved oil and gas reserves with the Department of
Energy, which are within five percent of these amounts.
Also contained in the Supplemental Information in the Consolidated
Financial Statements are the Company's estimates of future net cash flows,
discounted future net cash flows before income taxes and discounted future net
cash flows after income taxes from proved reserves.
The Company emphasizes that the volumes of reserves are estimates which, by
their nature, are subject to revision. The estimates are made using all
available geological and reservoir data, as well as production performance data.
These estimates are reviewed annually and revised, either upward or downward, as
warranted by additional performance data.
EXPLORATION AND DEVELOPMENT ACTIVITIES
See narrative description on pages 8 through 24 of the Anadarko Petroleum
Corporation 1997 Annual Report to Stockholders (Annual Report), which is
incorporated herein by reference, and see Marketing Strategies, Operating
Results and Acquisitions and Divestitures under Item 7 of this Form 10-K.
VOLUMES AND PRICES
The following table shows the Company's annual production volumes. Volumes
for natural gas are in billion cubic feet (Bcf) at a pressure base of 14.73
pounds per square inch (psi) and volumes for oil, condensate and NGLs are in
thousands of barrels (MBbls). Total volumes are in million EEBs. For this
computation, one barrel is the energy equivalent of six thousand cubic feet
(Mcf).
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1997 1996 1995
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UNITED STATES
Natural gas (Bcf) 178.7 164.9 171.7
Oil and condensate (MBbls) 9,083 6,702 7,435
Natural gas liquids (MBbls) 5,467 3,514 3,580
Total (million EEBs) 44.3 37.7 39.6
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The following table shows the Company's annual average U.S. wellhead sales
prices and average production costs.
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1997 1996 1995
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UNITED STATES
Sales price
Natural gas (per Mcf) $ 2.30 $ 2.13 $ 1.42
Oil and condensate (per barrel) 18.03 20.21 16.52
Natural gas liquids (per barrel) 14.64 16.86 12.81
Production cost (per EEB) 3.56 3.22 3.19
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Additional information on volumes and prices is contained in Analysis of
Volumes and Prices under Item 7 of this Form 10-K. Information on major
customers is contained in Note 9 of the Notes to Consolidated Financial
Statements under Item 8 of this Form 10-K.
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PROPERTIES AND ACTIVITIES -- UNITED STATES
ONSHORE
OVERVIEW The Company's onshore reserves comprise about 64 percent of total
proved reserves. These reserves are located principally in Kansas, Oklahoma,
Texas and Alaska. In 1997, average production from the Company's onshore
properties was 343 million cubic feet per day (MMcf/d) of gas and 19,000 barrels
of oil per day (BOPD), or 75 percent of the Company's total production volumes.
Anadarko has 1,286,000 gross (523,000 net) undeveloped lease acres and 1,034,000
gross (790,000 net) developed acres onshore in the United States.
The accompanying map illustrates by state Anadarko's undeveloped and
developed net acreage, number of net producing wells and other data relevant to
its onshore oil and gas operations.
HUGOTON EMBAYMENT Anadarko's single largest asset is its reserves in the
Hugoton Embayment, located in southwest Kansas and the Oklahoma and Texas
panhandles. Currently, Anadarko controls about 1,000,000 lease acres in these
areas and operates about 2,750 wells. Anadarko's net production from the Hugoton
Embayment in 1997 was 99.2 Bcf of gas and 1.53 MMBbls of oil and condensate, or
about 40 percent of the Company's total production volumes. In 1997, Anadarko
drilled 177 conventional wells, 49 horizontal wells and recompleted 55 wells in
the area.
Anadarko's activities in the Hugoton Embayment are concentrated on three
areas: the shallow gas fields in southwest Kansas and the Oklahoma panhandle,
the deeper oil and gas zones below shallow production and horizontal drilling in
the West Panhandle Field of Texas.
In 1997, the Company nearly doubled its acreage position in the deep play
through a joint venture with Mobil Exploration and Production, U.S., Inc.
(Mobil). Anadarko is operator of the 50/50 joint venture. Mobil contributed
484,000 net undeveloped lease acres to the joint venture; Anadarko contributed
approximately 150,000 undeveloped acres that revert to the Company from another
operator in 1999. Anadarko is committed to spend $24 million over a four-year
period. The joint venture can be extended indefinitely. During late 1997, the
partners began a three-dimensional (3-D) seismic shoot on the Mobil acreage.
Anadarko is planning to shoot 230 square miles of seismic data in the Hugoton
Embayment during 1998. The partners have initiated the drilling program and plan
to drill about 40 wells during 1998. Anadarko may drill up to 700 wells on the
joint venture acreage over the next decade.
Over the last five years, Anadarko has drilled more than 550 wells (gross)
in the Hugoton Embayment, adding proved reserves of 38 million EEBs. In addition
to development drilling, Anadarko's operations in this area have benefited from
acquisitions of producing properties, gas gathering systems and waterflood
operations.
GOLDEN TREND Activity levels increased in central Oklahoma's Golden Trend area,
where the Company drilled 27 wells during 1997. The Company has a working
interest in 290 wells in the Golden Trend, of which 205 wells are
Anadarko-operated. Two packages of properties in the area were purchased during
1997, adding proved reserves and new drilling locations for 1998 and beyond.
Production from the area was 22 MMcf/d of gas and 750 BOPD at year-end 1997.
Over the last five years, Anadarko has drilled 120 wells in the Golden
Trend. Recently, Anadarko utilized a 40-acre infill drilling program in the
area. To date, 23 increased density wells have been completed. Anadarko plans to
drill 33 development wells in the Golden Trend in 1998. Value is added to the
Company's Golden Trend assets through the Anadarko-operated Antioch Gathering
System. The system has 120 miles of pipe and connects over 200 wells in the
area. During 1997, the Antioch system moved an average of 27 MMcf/d of gas.
Anadarko plans to grow its asset base and production in the Golden Trend.
The Company has a four-part strategy in this area which includes: expansion of
the 40-acre infill drilling program; select acquisitions and joint venture
opportunities for undeveloped acreage; develop and utilize technology to
maximize reserve recovery and economic returns; and, integrate 3-D seismic
technology to exploit secondary objectives and expand known field limits.
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ONSHORE MAP (GRAPHIC MATERIAL OMITTED)
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NET NET NET
DEVELOPED UNDEVELOPED PRODUCING
ACRES ACRES WELLS
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ONSHORE:
United States
Alaska* -- 119,106 --
Colorado 3,003 6,560 --
Kansas* 351,701 58,837 1,556
Mississippi* 117 68,446 --
Montana 1,872 250 --
Nebraska 96 209 --
Nevada -- 53,023 --
New Mexico 16,223 1,920 25
North Dakota 40 -- --
Oklahoma* 217,291 90,452 824
Texas* 178,839 57,251 2,016
Utah* 18,222 35,078 47
Wyoming 2,731 32,175 --
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OFFICE LOCATIONS:
United States
Anchorage, Alaska
Houston, Texas
Midland, Texas
Liberal, Kansas
* Drilling activities were conducted in these areas in 1997.
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PERMIAN BASIN Drilling activity reached record levels for Anadarko during 1997
in the Permian Basin of west Texas and eastern New Mexico. As a result, oil
production from the area increased 37 percent during the year. At year-end 1997,
net oil production from the area was about 13,000 BOPD, or about half of the
Company's total oil production. In the Permian Basin, Anadarko holds leasehold
interests in 213,000 gross (124,000 net) acres and operates about 2,600 active
wells. During 1997, Anadarko drilled 411 wells (115 primary and 296 secondary)
in the area and had an average of 11 Company-operated rigs running during the
year.
Extending field limits was the focus of the work program in the Sharon
Ridge/Diamond M and Ketchum Mountain (Clearfork) Fields. During 1997, the
Company drilled 110 wells in these two Fields, combined, adding proved reserves.
The Fields are located in Scurry and Irion Counties, Texas, respectively.
In the Ketchum Mountain Field, Anadarko posted record production volumes of
more than 3,000 BOPD. Anadarko leased an additional 17,000 acres in the area
during 1997. In 1998, the Company plans to drill an additional 29 wells in the
Field and strengthen its acreage position. Anadarko owns a 100-percent working
interest in the Ketchum Mountain Field.
Anadarko plans to drill more wells in the Permian Basin during 1998 which
is expected to increase the Company's production volumes from the area in 1998.
EAST TEXAS Anadarko expanded its operations in the Bossier Sand Play, a new
area for the Company. Although located in the same geographic region as the
Cotton Valley Reef Play, the Bossier Sand Play targets totally different
horizons. Three separate Bossier reservoirs exist on Anadarko's leasehold with
net pay sand thickness in many areas of more than 100 feet. The Company's
production from the area at year-end 1997 was 12.6 MMcf/d of gas.
Anadarko began working the Bossier Sand Play in 1996, drilling four
successful wells in the Mimms Creek Field of Freestone County, Texas. Drilling
continued in this Field during 1997, with six delineation wells. Anadarko
believes that the Mimms Creek Field has the potential for an additional 36
development wells over the next three years.
Leasing activity accelerated in 1997, with Anadarko expanding its acreage
position around the Mimms Creek Field. Eight Anadarko-operated (100-percent
working interest) wells were drilled to extend the Field limits. Anadarko
participated in the drilling of 14 wells during 1997, all of which were
successful. The most significant well was the Black A-1, located in the adjacent
Dew West Field, flowing at an initial rate of 7.1 MMcf/d of gas. Anadarko is
planning to drill 33 wells in the area during 1998.
GULF COAST In the Gulf Coast states of Texas, Louisiana and Mississippi,
Anadarko has been active in several select exploration plays. Using 3-D seismic
and advanced processing tools, the Company is evaluating the exploration
potential of these areas.
In the Hartburg Play, located in Orange County, Texas, Anadarko
participated in the drilling of four wells during 1997. Three of the wells were
successful with a combined flow rate of 10 MMcf/d of gas and 275 barrels of
condensate per day (gross). The Company's working interest in the area varies
from 25-50 percent. Anadarko has an interest in approximately 1,900 undeveloped
lease acres in the area.
Along the upper Texas Coast, Anadarko has been developing reserves in the
Yegua Trend since the early 1990s. During 1997, Anadarko drilled a successful
development well in the area -- the Long No. 1 well. The Company also acquired a
24 square-mile 3-D seismic survey in the area. The data will be processed and
used to develop potential prospects in 1998. Anadarko has an average 50-percent
working interest in about 23,000 (gross) lease acres in the Yegua Trend.
In south Texas' Jim Hogg County, Anadarko is evaluating the exploration
potential of the Wilcox Play. A 120 square-mile 3-D seismic survey shot in 1996
was processed in early 1997, revealing several exploration leads. Anadarko has a
33.33-percent working interest in the Wilcox Play with exploration rights to
about 36,000 undeveloped lease acres (gross).
Anadarko participated in two exploratory dry holes in the Smackover Play of
Wayne County, Mississippi during 1997. One of the wells was based on a 200
square-mile 3-D seismic acquisition program done in 1996. In late 1997, Anadarko
sold its 50-percent interest in the Smackover Play.
COAL-BED METHANE Anadarko is developing coal-bed methane acreage in the Helper
Field, located in Carbon County, Utah. During 1997, Anadarko drilled 20 wells on
state and private acreage. Plans call for the
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drilling of 10 wells during 1998. An environmental impact statement (EIS) is
underway on the Company's federal acreage and additional drilling is planned for
1999-2000, upon completion of the EIS. Anadarko sees the potential to drill more
than 50 wells in the Helper Field over the next five years. Anadarko has a
100-percent working interest in the Field.
GATHERING AND PROCESSING
GAS GATHERING SYSTEMS Anadarko owns and operates four major gas gathering
systems in the nation's mid-continent area: the Antioch Gathering System in the
Southwest Antioch Field of Oklahoma; the Hemphill Gathering System, located in
Hemphill County, Texas; the Sneed System in the West Panhandle Field of Texas;
and the Hugoton Gathering System in southwest Kansas. The Company's gathering
systems have more than 2,500 miles of pipeline connecting about 2,000 wells and
have more than 500 MMcf/d of gas gathering capacity. In addition, Anadarko owns
interests in nine other smaller gas gathering systems.
GAS PROCESSING FACILITIES During 1997, the Company shut down its last fully
owned and operated gas processing facility, the Sneed Gas Processing Plant,
located in the West Panhandle Field of Texas. The Company also sold its
remaining interests in three other plants. These moves, together with the
closing of the Company's Panther Creek Gas Processing Plant in late 1996, were
made based upon a strategic decision to take advantage of excess capacity in
more modern and efficient plants owned by third parties in the mid-continent.
This strategy results in an increase in NGL product recoveries, particularly
ethane and propane, due to the efficiency of newer processing facilities.
Additionally, certain other third-party processing arrangements were
restructured in 1997 to increase the volume of NGLs the Company can take in-kind
and to allow additional processing flexibility. Anadarko's NGLs sales volumes
increased 56 percent in 1997.
ALASKA
Anadarko is active in two areas in Alaska -- the North Slope and the Cook Inlet
of southern Alaska.
ALPINE FIELD During 1997, engineering and development work continued on the
Alpine Field, which was discovered in 1994 and declared commercial in 1996. The
Field is located on the North Slope about 50 miles west of Prudhoe Bay. First
production from the Alpine Field is estimated in 2000 at an initial rate of
40,000 BOPD (gross). Production is estimated to ramp up to 70,000 BOPD (gross)
in 2001. Key fabrication contracts were signed during 1997, allowing
construction of the production equipment to begin. Work on the pipeline
connecting Alpine to the Trans Alaska Pipeline System terminus at the Kuparuk
River is expected to begin this winter season.
In the winter season of 1997-98, the partners are planning to drill up to
three wells. Two of the planned wells are horizontal wells -- the first time
this has been attempted in the Alpine Field. If horizontal drilling is
successful, it could reduce the number of wells required for full field
development, therefore lowering total costs. Full development of the Alpine
Field is estimated to cost far less than originally anticipated. Anadarko owns a
22-percent working interest in the Field. In 1996, the partners acquired 5,900
acres near the Field in State Lease Sale 86A.
Anadarko and partner ARCO Alaska also have six offshore lease blocks in the
Beaufort Sea, west of the Alpine Field.
COOK INLET Anadarko is operating an exploration venture in the Cook Inlet.
Under the terms of a strategic alliance signed in 1996, Anadarko and ARCO Alaska
each currently own a 50-percent interest in 166,000 lease acres. During 1997,
the partners completed a 140-mile 2-D seismic acquisition program. The data were
processed during 1997 and used to develop a list of exploratory prospects on
both sides of the Cook Inlet. Anadarko is planning to drill one or two wells
during 1998. The first well -- known as the Lone Creek No. 1 in the Moquawkie
Prospect -- is expected to spud in mid-1998, depending on the issuance of
necessary permits. A 3-D seismic survey is now underway on the Kenai Peninsula.
This is the first regional 3-D survey ever conducted on the Kenai Peninsula.
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OFFSHORE
OVERVIEW At year-end 1997, about 10 percent of the Company's proved reserves
were located offshore in the Gulf of Mexico. Production volumes from these
properties were 160 MMcf/d of gas and 5,500 BOPD at year-end 1997. The Company's
production from the Gulf of Mexico increased during 1997 due to higher levels of
activity on producing platforms. At year-end 1997, Anadarko owned an average 49
percent working interest in 119 lease blocks representing 188,000 gross (54,000
net) acres in developed properties and 437,000 gross (235,000 net) acres in
undeveloped properties offshore.
The accompanying map illustrates the Company's undeveloped and developed
net acres, number of producing net wells and other data relevant to its offshore
properties.
EXPLORATION Anadarko is active in exploration projects in conventional,
sub-salt and deepwater plays in the Gulf of Mexico.
Anadarko drilled three offshore exploration wells (two sub-salt and one
conventional) during 1997, which were dry holes. During 1996, the Company
drilled five sub-salt exploratory wells, announcing two discoveries -- Agate,
located at Ship Shoal 361, (See Development) and Monazite, located at Vermilion
South Addition 375. Seismic and drilling data from the Monazite discovery were
further evaluated during 1997 and the partners may drill a delineation well near
the discovery during 1998. Anadarko (operator) has a 33.33-percent working
interest in the Monazite well. The industry's first commercial sub-salt field in
the Gulf of Mexico -- Mahogany -- came on-line in late 1996 (See Development).
The Company will continue to evaluate its portfolio of prospects located on 32
lease blocks in the sub-salt play.
Two Company-operated sub-salt exploration wells and one conventional
exploration well are planned in the Gulf of Mexico during 1998. The first
sub-salt well, known as Hickory, located at Grand Isle Block 116, and the second
prospect, Tanzanite, located at Eugene Island 346, are expected to spud in March
1998.
Until 1996, the Company's principal acreage position offshore was in the
shallow water (less than 400 feet). In 1996, Anadarko made its entrance into the
deepwater play (more than 1,000 feet). Anadarko currently has interests in 13
deepwater lease blocks, 11 of which are Company-operated. Seismic data were
acquired over several of the deepwater blocks during 1997. One exploratory well,
located at Green Canyon 608, may be drilled in this play in late 1998, depending
on rig availability.
DEVELOPMENT Much of the 1997 work program in the Gulf of Mexico centered on
improving production from existing platforms. The Company's greatest success
came at the Matagorda Island 622/623 Complex, located offshore Texas and
discovered by Anadarko in 1980. At the beginning of 1997, production from the
Complex was 189 MMcf/d (gross) of gas. Production at year-end 1997 was about 325
MMcf/d of gas, with 75 MMcf/d curtailed due to pipeline constraints. By drilling
four new development wells, working over two original wells and recompleting
another well, production capacity from the Complex was approaching 400 MMcf/d of
gas in early 1998. A six-mile pipeline will be constructed in the second quarter
of 1998 that will connect the platform to existing facilities, bringing this
additional gas production to market. The partners are planning at least one
additional well at Matagorda Island 622/623 in 1998. Anadarko has a 37.5-percent
working interest in the Complex.
1997 represented the first full year of production from the Mahogany
platform, located at Ship Shoal 349/359 offshore Louisiana. Originally announced
in September 1993, this sub-salt discovery came on-line in late December 1996.
Four wells produced during 1997, with production averaging about 9,000 BOPD and
25 MMcf/d of gas. A fifth well came on-line in the first quarter of 1998 at an
initial rate of 11,000 BOPD. During 1997, production was somewhat erratic due to
downtime associated with normal completion operations. The sixth well is
drilling and further drilling is planned from the platform during 1998. Three of
the current producing wells are completed in zones other than the main field pay
sand ("P" sand). As production from these zones depletes, the wells will be
recompleted into the "P" sand. Anadarko has a 37.5-percent working interest in
the project.
The Agate discovery, located at Ship Shoal 361, is under development and is
expected to be placed on production in mid-1998. Through a sub-sea completion,
production will be connected to the Mahogany platform. Anadarko owns a
50-percent working interest in the Agate well.
Conventional operations focused on development drilling and recompletions.
During 1997, Anadarko drilled six development wells and recompleted seven
existing producers.
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OFFSHORE MAP (GRAPHIC MATERIAL OMITTED)
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NET NET NET
DEVELOPED UNDEVELOPED PRODUCING
ACRES ACRES WELLS
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OFFSHORE:
United States
Florida -- 39,827 --
Louisiana 21,883 147,968 30
Texas 31,766 47,553 26
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PROPERTIES AND ACTIVITIES -- INTERNATIONAL
OVERVIEW Over the past few years, Anadarko has devoted a larger portion of its
capital expenditures to international exploration ventures. Exploration and
development work is underway in Algeria and exploration activities are being
conducted in Eritrea, Jordan, Peru, the North Atlantic Margin and Tunisia.
Studies are also being conducted in other prospective areas around the world.
The Company's international projects are all in the exploration or development
phase and have not generated any revenues to date. See Additional Factors
Affecting Business -- Foreign Operations Risk under Item 7 of this Form 10-K.
ALGERIA Anadarko's largest international venture involves exploration for and
development of liquid hydrocarbons in Algeria's Sahara Desert. Since 1989,
Anadarko has drilled 25 successful wells (13 exploration and 12 delineation) and
discovered five major fields in Algeria. During 1997, Anadarko drilled 11
exploratory wells, with seven discoveries. Satellite fields were discovered
around the Company's larger discoveries and development planning is underway.
The Company has booked proved reserves of 184.1 MMBbls (net) of crude oil as of
year-end 1997. The Company estimates that crude oil and condensate discovered to
date is 2.0 billion barrels (gross). The success of the exploration program led
the Company to increase its estimate of discovered oil by 500 million barrels
(gross) at mid-year 1997.
As of December 31, 1997, the Company's total net investment in Algeria was
$405 million (including capitalized interest and overhead) of which about $173
million was spent in 1997. Due to the success of the project thus far, these
expenditures are currently being capitalized and no provision for loss or
impairment has been made. Anadarko plans to invest about $275 million in Algeria
in 1998. To date, the Company has elected not to insure its investment in
Algeria. At the end of 1997, the Company had 5.3 million gross (2.3 million net)
acres in Algeria.
The accompanying map illustrates the Company's undeveloped acreage, number
of producing (tested) wells and other data relevant to its properties in
Algeria.
Anadarko's interest in the production sharing agreement (PSA) relating to
the four Company-operated blocks is 50 percent before participation at the
exploitation stage by SONATRACH, the national oil and gas enterprise of Algeria.
The Company has two partners, each with a 25-percent interest in the Algerian
venture, also prior to participation by SONATRACH; they are LASMO Oil (Algeria)
Limited, a wholly-owned subsidiary of LASMO plc, and Maersk Olie Algeriet AS, a
wholly-owned subsidiary of Maersk Olie Og Gas AS, a company in the Danish A.P.
Moeller group. Under the terms of the PSA, liquid hydrocarbons that are
discovered, developed and produced will be shared by SONATRACH, Anadarko and its
two partners. SONATRACH is responsible for 51 percent of development and
production costs. In addition, Anadarko and its partners are entitled to recover
a portion of exploration costs out of production in the exploitation phase.
SONATRACH is the beneficial owner of 10.1 percent of Anadarko's outstanding
common stock.
10
<PAGE> 12
ALGERIA MAP (GRAPHIC MATERIAL OMITTED)
ALGERIA
Undeveloped Acreage - 5.3 million acres (2.3 million net to Anadarko)
Productive (tested) Wells - 23 (10 net to Anadarko)
Fields discovered to date shown graphically
HBN/EL BIAR Field (formerly HBN)
ROD/BSFN Area*
BSF Field
HBNS Field*
HBNSE Field*
BKNE Field
QOUBBA Field (formerly BKE)*
EKT Field*
EME/EMK Field
Blocks shown graphically
401
402*
404*
208*
211*
245
* Drilling activities were conducted in these areas in 1997.
11
<PAGE> 13
During 1997, Anadarko concentrated its development efforts on the HBNS
Field, located on Block 404, following SONATRACH'S receipt of a Provisional
Exploitation Authorization (PEA) in July 1996 for wells in the Hassi Berkine
(HBN)/El Biar and the HBNS Fields. Anadarko and its partners have a $177-million
Engineering, Procurement and Construction (EPC) contract with Brown & Root
Condor for Stage I production facilities at the HBNS Field. At the time this
report was released for printing, the Central Production Facility was nearing
completion. First production from the HBNS Field is expected to commence in May
1998. The Company expects to sign an EPC for Stage II production facilities for
the HBNS Field in 1998. Construction of Stage II facilities is expected to take
18-24 months. Development drilling is underway in the HBNS Field. Full field
development calls for about 50 wells.
The Company also has a 27.5-percent interest in a PSA covering two
additional blocks -- Blocks 401 and 402 -- in the same region, which are
operated by BHP Petroleum (Algerie) Inc. (BHP Algeria). An exploration program
is underway on these two blocks. Anadarko and partners drilled two exploratory
discoveries on this acreage in 1997, followed by two delineation wells, all of
which were successful. A separate exploration success was announced on Block 402
in February 1998 -- the Bir Sif Fatima No. 1 -- flowing 1,960 BOPD. The partners
are planning to continue drilling exploration and delineation wells on the BHP
Algeria-operated acreage during 1998.
Political unrest continues in Algeria. Anadarko is closely monitoring the
situation and has taken reasonable and prudent steps to ensure the safety of
employees working and the security of its facilities in the remote regions of
the Sahara Desert. Anadarko is presently unable to predict with certainty any
effect the current situation may have on activity planned for 1998 and beyond.
However, the situation has not had any material effect to date on the Company's
operations.
ERITREA In September 1995, Anadarko signed an agreement with the government of
the State of Eritrea for offshore exploration on a 6.7 million-acre area in the
Red Sea, known as the Zula Block. This acreage position was expanded in late
1997 with the signing of a second PSA for 2.3 million acres. The new area is
called the Edd Block and is contiguous with the original area. Anadarko now has
exploration rights on 9.0 million acres (gross) in Eritrea and plans to drill
three exploratory wells during 1998. The first well is expected to spud in May
1998 on the Zula Block.
In 1996 and early 1997, Anadarko conducted a high-density aerial gravity
and magnetic survey over the exploration area. In 1997, the Company acquired
about 4,600 kilometers of 2-D seismic data on the blocks. The data were analyzed
during 1997 and combined with existing data from other operators. Agip S.p.A.
joined Anadarko as a partner in late 1997 with a 30-percent interest. Anadarko
operates and has a 70-percent interest in the Eritrean exploration venture.
JORDAN In March 1996, Anadarko and the Natural Resources Authority of the
Hashemite Kingdom of Jordan signed a PSA covering 4.2 million acres, known as
the Safawi Block. During 1997, Anadarko drilled a stratigraphic test well on the
Block, re-entering a well drilled by another operator in 1990. The results of
the well are being studied by the Company. Based on these results, Anadarko may
drill a second stratigraphic test well in Jordan during 1998.
In February 1997, a subsidiary of Union Texas Petroleum joined Anadarko as
a partner in Jordan with a 50-percent interest. Anadarko operates the
exploration venture with a 50-percent interest.
12
<PAGE> 14
PERU In September 1996, Anadarko signed an exploration license agreement with
PERUPETRO S.A., the state oil company of Peru. Anadarko has the right to explore
a 2.56 million-acre area, known as Block 84, located in the Ucayali Basin near
the Brazilian border.
Anadarko acquired 600 kilometers of seismic data over Block 84 during 1997.
Locations for the seismic acquisition program were based on a 7,300 kilometer
aerial gravity survey of the area conducted by the Company in late 1996.
Exploration in Peru carefully balances environmental concerns and local cultures
of those living on Block 84. All operations are supported by helicopter and boat
to limit the environmental impact. A comprehensive Environmental Impact
Statement was completed in early 1997 and accepted by the Peruvian government.
Anadarko owns a 100-percent interest in the exploration venture, but may take
partners.
NORTH ATLANTIC MARGIN During 1997, Anadarko established an exploration presence
in the North Atlantic Margin, located north and west of Scotland and offshore
Ireland. Through two separate bid rounds, Anadarko and partners were awarded
five exploration areas totaling about 1.3 million acres (gross).
Anadarko has been studying the exploration potential in this area since
1995. During 1997, Anadarko and partners were awarded three tranches in the
United Kingdom's 17th Bid Round and two exploration areas in the Irish Bid
Round. Anadarko is planning to participate in its first exploration well on
Tranche 61 in August 1998. Anadarko will have a 7.5-percent interest in the
well. Anadarko and partners have a significant amount of seismic data and expect
to drill multiple exploration targets over the next five years. Anadarko has an
average interest of 30 percent in the exploration areas.
TUNISIA In late 1997, Anadarko became a 50-percent partner (prior to back-in by
the Tunisian government) in Agip S.p.A.'s Jenein Nord Block -- a 384,000 acre
(gross) exploration area in Tunisia near the Algerian border. The Jenein Nord
Block is contiguous with the Company's Blocks 401 and 402 (operated by BHP
Algeria) in Algeria. Several exploration leads have been identified and drilling
could begin in late 1998.
INDONESIA In September 1996, Anadarko sold its wholly-owned subsidiary,
Anadarko Indonesia Company, Jabung, for $36.8 million. Anadarko's net income in
1996 benefited from a gain on the sale of $19.4 million ($12.3 million after
income taxes). The sale was a part of the Company's ongoing strategy to divest
"non-core" assets and reinvest proceeds in core operating areas. Anadarko and
its partners had discovered two fields in Indonesia with estimated proved
reserves of 17.7 million EEBs.
CHINA The Company has decided not to pursue exploration efforts in China's
Sichuan Province at this time and is in discussions to farm-out the Company's
interests. As a result, Anadarko recognized an impairment of $4.6 million in
1996. The Company has a 50-percent interest in the project.
13
<PAGE> 15
DRILLING PROGRAMS
The Company's 1997 drilling program again focused on known oil and gas
provinces onshore in North America, as well as offshore in the Gulf of Mexico
and Algeria. Onshore activity was concentrated in Kansas, Oklahoma, the Texas
panhandle, the Permian Basin of west Texas, Alaska and Utah. Exploration
activity consisted of six wells onshore in the United States, seven wells
offshore United States and 13 wells in Algeria. Development activity included
607 wells onshore United States and 11 wells offshore United States. In
addition, two development wells were also drilled in Algeria during 1997.
DRILLING STATISTICS
The following table shows the results of the oil and gas wells drilled and
tested:
<TABLE>
<CAPTION>
NET EXPLORATORY NET DEVELOPMENT
------------------------------ ------------------------------
PRODUCTIVE DRY HOLES TOTAL PRODUCTIVE DRY HOLES TOTAL TOTAL
---------- --------- ----- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1997
United States 6.1 3.1 9.2 433.8 50.9 484.7 493.9
Algeria 3.8 2.0 5.8 0.7 -- 0.7 6.5
--- ---- ---- ----- ---- ----- -----
Total 9.9 5.1 15.0 434.5 50.9 485.4 500.4
--- ---- ---- ----- ---- ----- -----
1996
United States 5.3 5.8 11.1 163.5 37.9 201.4 212.5
Algeria 2.0 0.5 2.5 -- -- -- 2.5
Indonesia 1.0 -- 1.0 -- -- -- 1.0
--- ---- ---- ----- ---- ----- -----
Total 8.3 6.3 14.6 163.5 37.9 201.4 216.0
--- ---- ---- ----- ---- ----- -----
1995
United States 2.3 2.9 5.2 159.9 40.1 200.0 205.2
Algeria 2.0 0.5 2.5 -- -- -- 2.5
Indonesia 1.0 -- 1.0 -- -- -- 1.0
--- ---- ---- ----- ---- ----- -----
Total 5.3 3.4 8.7 159.9 40.1 200.0 208.7
--- ---- ---- ----- ---- ----- -----
</TABLE>
The following table shows the number of wells in the process of drilling or
in active completion stages and the number of wells suspended or waiting on
completion as of December 31, 1997:
<TABLE>
<CAPTION>
UNITED STATES ALGERIA TOTAL
-------------- ------------- --------------
GROSS NET GROSS NET GROSS NET
----- ---- ----- --- ----- ----
<S> <C> <C> <C> <C> <C> <C>
WELLS IN THE PROCESS OF DRILLING OR IN
ACTIVE COMPLETION
Exploration 3 2.3 3 1.1 6 3.4
Development 24 19.6 1 0.3 25 19.9
WELLS SUSPENDED OR WAITING ON COMPLETION
Exploration 3 0.9 -- -- 3 0.9
Development 62 54.6 -- -- 62 54.6
</TABLE>
14
<PAGE> 16
PRODUCTIVE WELLS
As of December 31, 1997, the Company owned productive wells as follows:
<TABLE>
<CAPTION>
UNITED STATES ALGERIA TOTAL
-------------- ------------ --------------
GROSS NET GROSS NET GROSS NET
----- ----- ----- --- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Oil wells* 4,687 2,551 23 10 4,710 2,561
Gas wells* 2,618 1,973 -- -- 2,618 1,973
----- ----- -- -- ----- -----
Total 7,305 4,524 23 10 7,328 4,534
----- ----- -- -- ----- -----
- ---------------------------------------------------------------------------------------------
* Includes wells containing multiple completions
Oil wells 74 25.8 -- -- 74 25.8
Gas wells 230 135.0 -- -- 230 135.0
</TABLE>
EMPLOYEES
As of December 31, 1997, the Company employed 1,386 persons. The Company's
employees are not represented by any union. Relations between the Company and
its employees are considered to be satisfactory and the Company has had no work
stoppages or strikes.
REGULATORY AND LEGISLATIVE DEVELOPMENTS
See Regulatory Matters under Item 7 of this Form 10-K.
ADDITIONAL FACTORS AFFECTING BUSINESS
See Additional Factors Affecting Business under Item 7 of this Form 10-K.
TITLE TO PROPERTIES
As is customary in the oil and gas industry, only a preliminary title
examination is conducted at the time properties believed to be suitable for
drilling operations are acquired by the Company. Prior to the commencement of
drilling operations, a thorough title examination of the drill site tract is
conducted and curative work is performed with respect to significant defects, if
any, before proceeding with operations. A thorough title examination has been
performed with respect to substantially all leasehold producing properties owned
by the Company. Anadarko believes the title to its leasehold properties is good
and defensible in accordance with standards generally acceptable in the oil and
gas industry subject to such exceptions which, in the opinion of counsel
employed in the various areas in which the Company has conducted exploration
activities, are not so material as to detract substantially from the use of such
properties. The leasehold properties owned by the Company are subject to
royalty, overriding royalty and other outstanding interests customary in the
industry. The properties may be subject to burdens such as liens incident to
operating agreements and current taxes, development obligations under oil and
gas leases and other encumbrances, easements and restrictions. Anadarko does not
believe any of these burdens will materially interfere with its use of these
properties.
CAPITAL SPENDING
See Capital Expenditures, Liquidity and Long-term Debt under Item 7 of this
Form 10-K.
15
<PAGE> 17
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK
DIVIDENDS
The Company's ratios of earnings to fixed charges for the years ended
December 31, 1997, 1996 and 1995 were 3.04, 3.34 and 1.24, respectively. These
ratios were computed by dividing earnings by fixed charges. For this purpose,
earnings include income before income taxes and fixed charges. Fixed charges
include interest and amortization of debt expenses and the estimated interest
component of rentals.
During the three years ended December 31, 1997, there were no shares of
preferred stock outstanding. Accordingly, the ratio of earnings to combined
fixed charges and preferred stock dividends for each of the three years is the
same as the ratio of earnings to fixed charges.
ITEM 2. PROPERTIES
See information appearing under Item 1 of this Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
KANSAS AD VALOREM TAX The Natural Gas Policy Act of 1978 (NGPA) allowed a
"severance, production or similar" tax to be included as an add-on, over and
above the maximum lawful price for natural gas. Based on the Federal Energy
Regulatory Commission (FERC) ruling that the Kansas ad valorem tax was such a
tax, the Company collected the Kansas ad valorem tax in addition to the
otherwise maximum lawful price. FERC's ruling was appealed to the United States
Court of Appeals for the District of Columbia (D.C. Circuit), which held in June
1988 that FERC failed to provide a reasoned basis for its findings and remanded
the case to FERC for further consideration.
On December 1, 1993, FERC issued an order reversing its prior ruling, but
limiting the effect of its decision to Kansas ad valorem taxes for sales made on
or after June 28, 1988. FERC clarified the effective date of its decision by an
order dated May 19, 1994. The clarification provided that the June 28, 1988
effective date applies to tax bills rendered after that date, not sales made on
or after that date. Based on Anadarko's interpretation of FERC's orders,
$700,000 (pre-tax) was charged against income in 1994, in addition to $130,000
(pre-tax) charged against income in 1993. Numerous parties filed appeals of
FERC's action in the D.C. Circuit. Anadarko, together with other natural gas
producers, challenged FERC's orders on two grounds: (1) that the Kansas ad
valorem tax, properly understood, did qualify for reimbursement under the NGPA;
and (2) FERC's ruling should, in any event, have been applied prospectively.
Other parties separately challenged FERC's orders on the grounds that FERC's
ruling should have been applied retroactively to December 1, 1978, the date of
the enactment of the NGPA and producers should have been required to pay refunds
accordingly.
The D.C. Circuit issued its decision on August 2, 1996 which holds that
producers must make refunds of all Kansas ad valorem taxes collected with
respect to production since October 1983. Petitions for rehearing were denied on
November 6, 1996. The Company, along with other producing companies,
subsequently filed a petition for writ of certiorari with the United States
Supreme Court seeking to limit the scope of the potential refunds to tax bills
rendered on or after June 28, 1988 (the effective date originally selected by
FERC). Williams Natural Gas Company filed a cross-petition for certiorari
seeking to impose refund liability back to December 1, 1978. Both petitions were
denied on May 12, 1997.
Anadarko estimates that the maximum amount of principal and interest at
issue which has not been paid to date and assuming that the October 1983
effective date remains in effect, is about $40 million (pre-tax) as of December
31, 1997. The Company, along with other producing companies, filed a petition
for adjustment with FERC on May 12, 1997. In so doing, the Company sought waiver
of all interest which might otherwise be due. The total interest at issue is
about $25 million (pre-tax). On September 10, 1997, FERC denied the petition for
adjustment. On January 28, 1998, FERC denied rehearing, but granted first
sellers the right to escrow funds in dispute in a separate order (the "Order
Clarifying Procedures"). By order dated February 26, 1998, in response to
producers' requests and Anadarko's particular request based on the litigation
with PanEnergy referenced below, FERC granted first sellers the right to secure
a surety bond instead of placing cash in escrow. All interested parties will
have 30 days to seek rehearing of this order. Refunds currently are
16
<PAGE> 18
due to be paid by first sellers, with disputed amounts escrowed by cash or
secured by surety bond, by March 9, 1998, although a request for a general
extension of time filed by other producers is pending.
Several parties, including Anadarko, sought rehearing or clarification of
the Order Clarifying Procedures. In that rehearing request, the Company outlined
in detail its interpretation of the scope of the phrase "amounts in dispute" as
encompassing legal disputes. At least one adverse party has requested that FERC
not permit producers to escrow disputed amounts or that FERC change its order to
permit only so-called "computational" disputes, rather than legal disputes, to
be eligible for escrow.
On March 4, 1998, FERC granted rehearing of its Order Clarifying Procedures
solely for purposes of further consideration. FERC's March 4, 1998 Order
provided affected parties with no substantive guidance regarding the pending
requests for rehearing or clarification. The March 4 Order simply had the effect
of granting the FERC more time to consider the pleadings pending before it.
If FERC should change or clarify its policy regarding the availability or
scope of a first sellers' right to bond or escrow disputed amounts, either on
its own motion or in response to pending rehearing requests, or if FERC should
reject the Company's legal defenses, the Company could be required to pay all or
part of the amounts claimed by all pipelines (which might include PanEnergy)
pending further potential review by FERC or federal courts. However, a FERC
order issued February 26, 1998 involving refunds paid by another producer to
Northern Natural Gas Company indicates that, if a producer prevails in
subsequent legal challenges, it may recoup amounts paid directly from the
pipeline itself, even if the pipeline subsequently distributes refunds to the
pipeline's customers. It should be noted, however, that interested parties will
have 30 days to seek rehearing or clarification of this order.
The Company intends to comply fully with all lawful orders issued by FERC,
without waiver of any claim of right or any defense or the right to seek
judicial review or intercession.
FERC's September 10, 1997 and January 28, 1998 Orders permit affected first
sellers to file individual petitions for adjustment. The Company may pursue an
individual petition for adjustment and has reserved all rights to contest
specific Statement of Refunds submitted by pipeline purchasers. Offers of
settlement and demands for a hearing have been filed by producers, including
Anadarko, with the FERC regarding particular pipeline purchasers. The offer of
settlement filed by Anadarko with respect to PanEnergy is subject to the
litigation discussed below such that if a settlement amount is agreed to, the
litigation will determine whether PanEnergy or Anadarko issues the agreed to
refund. On March 3, 1998, FERC issued notice regarding those settlement offers
and requested comment by all interested persons.
On May 13, 1997, the Company filed a lawsuit in the Federal District Court
for the Southern District of Texas against PanEnergy seeking declaration that
pursuant to prior agreements Anadarko is not required to issue refunds to
PanEnergy for the principal amount of $14 million (pre-tax) and, if the petition
for adjustment discussed above is not granted in its entirety by FERC with
respect to PanEnergy refunds, interest in an amount of $24 million (pre-tax) as
of December 31, 1997. The Company also seeks from PanEnergy the return of
$816,000 of the $830,000 (pre-tax) charged against income in 1993 and 1994. This
lawsuit currently has pending cross motions for summary judgment. In addition,
on February 18, 1998, PanEnergy filed a motion asserting that FERC has exclusive
jurisdiction over the matter and requesting the Court to dismiss or stay the
lawsuit. The Company filed appropriate responses disputing this contention.
Anadarko's net income for 1997 included a $1.8 million charge (before
income taxes) related to the Kansas ad valorem tax refunds. This charge reflects
all principal and interest which may be due at the conclusion of all regulatory
proceedings and litigation to parties other than PanEnergy. The Company is
unable at this time to predict the final outcome of this matter and no provision
for liability (excluding the amounts recorded in 1993, 1994 and 1997) has been
made in the accompanying financial statements.
OTHER The Company is subject to other legal proceedings, claims and liabilities
which arise in the ordinary course of its business. In the opinion of the
Company, the liability with respect to these actions will not have a material
effect on the Company.
17
<PAGE> 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE AT END
NAME OF 1998 POSITION
---- ---------- --------
<S> <C> <C>
Robert J. Allison, Jr. 59 Chairman of the Board, President and Chief Executive
Officer
John N. Seitz 47 Executive Vice President, Exploration and Production
Charles G. Manley 54 Senior Vice President, Administration
Michael E. Rose 51 Senior Vice President, Finance and Chief Financial
Officer
Charles K. Abernathy 55 Vice President, Operations, International
Rex Alman III 47 Vice President, Domestic Operations
Michael D. Cochran 56 Vice President, Exploration
James R. Larson 48 Vice President and Controller
Richard A. Lewis 54 Vice President, Human Resources
J. Stephen Martin 42 Vice President and General Counsel
Gregory M. Pensabene 48 Vice President, Government Relations
Albert L. Richey 49 Vice President and Treasurer
Richard J. Sharples 51 Vice President, Marketing
Bruce H. Stover 49 Vice President, Worldwide Business Development
William D. Sullivan 42 Vice President, Algeria
A. Paul Taylor, Jr. 49 Vice President, Corporate Communications
</TABLE>
Mr. Allison was named Chairman and Chief Executive Officer effective
October 1986. In January 1993, he was elected the additional position of
President. He has worked for the Company since 1973.
Mr. Seitz was named Executive Vice President, Exploration and Production,
and a member of the Company's Board of Directors during 1997. He was named
Senior Vice President, Exploration in 1995 and Vice President, Exploration in
January 1993. He has worked for the Company since 1977.
Mr. Manley was named Senior Vice President, Administration in 1993. From
1985 to 1993, he served as Anadarko's Vice President of Administration and
Employee Relations. He has worked for the Company since 1974.
Mr. Rose was named Senior Vice President, Finance and Chief Financial
Officer in 1993. He was named Vice President of Finance in 1986. He has worked
for the Company since 1978.
Mr. Abernathy was named Vice President, Operations, International, with
responsibility for Alaska development operations, in 1997. He was named Vice
President, Operations, Offshore in 1995 and Vice President, Operations,
International/Offshore, in 1992. He has worked for the Company since 1975.
Mr. Alman was named Vice President, Domestic Operations, in 1997. Prior to
that, he was named Vice President, Operations, U.S. Onshore in 1995 and Vice
President, Engineering in 1993. He has worked for the Company since 1976.
Dr. Cochran was named Vice President, Exploration in 1997. Prior to that,
he was Manager of Technology and Exploration Studies. He has been with the
Company since 1987.
Mr. Larson was named Vice President and Controller in 1995. He had served
as the Company's Controller since 1986. He has worked for the Company since
1983.
Mr. Lewis was named Vice President, Human Resources in 1995. He joined the
Company in 1985 as Manager of Employee Relations.
Mr. Martin was named Vice President and General Counsel in 1995. He joined
the Company as an attorney in 1987.
Mr. Pensabene joined Anadarko in 1997 as Vice President, Government
Relations. Prior to Anadarko, he was a partner in various law firms in
Washington, D.C.
Mr. Richey was named Vice President and Treasurer in 1995. He joined
Anadarko as Treasurer in 1987.
18
<PAGE> 20
Mr. Sharples joined Anadarko as Vice President, Marketing, in 1993. Prior
to Anadarko, he served as Vice President of Marketing with Maxus Energy
Corporation.
Mr. Stover was named Vice President, Worldwide Business Development, in
1998. He was named Vice President, Acquisitions in 1993. He has worked for the
Company since 1980.
Mr. Sullivan was named Vice President, Algeria in 1995. Prior to this
position, he served as Vice President, Operations, U. S. Onshore. He has worked
for the Company since 1981.
Mr. Taylor was named Vice President, Corporate Communications in 1987. He
has worked for the Company since 1986.
All officers of Anadarko are elected in April of each year at an
organizational meeting of the Board of Directors to hold office until their
successors are duly elected and shall have qualified. There are no family
relationships between any directors or executive officers of Anadarko.
19
<PAGE> 21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information on the market price and cash dividends declared per share of
common stock is included in the Stockholders' Information in the Annual Report,
which is incorporated herein by reference.
As of December 31, 1997, there were approximately 5,760 direct holders of
Anadarko common stock. The following table sets forth the amount of dividends
paid on Anadarko common stock during the two years ended December 31, 1997.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
thousands ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1997 $4,553 $4,401 $4,479 $4,493
1996 $4,431 $4,440 $4,448 $4,461
</TABLE>
The amount of future dividends will depend on earnings, financial
condition, capital requirements and other factors, and will be determined by the
Directors on a quarterly basis.
For additional information, see Dividends under Item 7 and Note 7 of the
Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
See Summary Financial Data on page 1 of the Annual Report, which is
incorporated herein by reference.
20
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL RESULTS
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1997 1996 1995
millions except per share amounts ------ ------ ------
<S> <C> <C> <C>
Revenues $673.2 $569.0 $434.0
Costs and expenses 469.8 373.4 369.5
Interest expense 41.0 39.0 36.4
Net income $107.3 $100.7 $ 21.0
Earnings per share - basic $ 1.80 $ 1.70 $ 0.36
Earnings per share - diluted $ 1.78 $ 1.69 $ 0.36
</TABLE>
NET INCOME AND REVENUES Anadarko's net income for 1997 increased seven percent
to $107.3 million ($1.80 per share) compared to 1996 net income of $100.7
million ($1.70 per share). Revenues for 1997 were up 18 percent to $673.2
million compared to 1996 revenues of $569.0 million. The increase in revenues
and net income reflects record production volumes of crude oil, natural gas and
natural gas liquids (NGLs) coupled with higher natural gas prices. Net income in
1996 included a gain of $19.4 million ($12.3 million after income taxes) on the
sale of the Company's Indonesia interests, which was partially offset by
provisions for impairments of other international properties of $5.4 million
($3.4 million after income taxes).
Anadarko's 1995 net income was $21.0 million (36 cents per share). Revenues
for 1995 were $434.0 million. The increases in revenues and net income in 1996
compared to 1995 reflect significantly higher commodity prices for crude oil,
natural gas and NGLs.
COSTS AND EXPENSES
<TABLE>
<CAPTION>
1997 1996 1995
millions ------ ------ ------
<S> <C> <C> <C>
Operating expenses $154.7 $115.3 $105.8
Administrative and general 73.6 67.7 59.5
DD&A 198.8 167.2 164.7
Other taxes 42.7 37.2 36.9
(Gains) and impairments related to international and
geothermal properties, net -- (14.0) 2.6
------ ------ ------
Total $469.8 $373.4 $369.5
------ ------ ------
</TABLE>
COSTS AND EXPENSES During 1997, Anadarko's costs and expenses increased 26
percent over 1996 primarily due to increased levels of activity. Anadarko pays
close attention to costs, focusing on cost controls, cost savings plans and the
application of new technology to field production operations. Costs and expenses
in 1997 were primarily impacted by the following factors:
(1) Operating expenses increased $39.4 million (34 percent) due primarily
to increased levels of drilling activity and revised NGLs contracts
that provide for processing through third-parties.
(2) Depreciation, depletion and amortization (DD&A) expense was up $31.6
million (19 percent) due primarily to the 18 percent increase in U.S.
production volumes from core areas of operation.
(3) Administrative and general expenses were up $5.9 million (nine percent)
due to higher costs associated with the Company's growing workforce.
In 1996, excluding the effect of the sale of the Company's Indonesia
interests, Anadarko's costs and expenses increased six percent over 1995 levels.
There were several reasons:
(1) Operating expenses increased $9.5 million (nine percent) due primarily
to costs associated with gas gathering operations.
21
<PAGE> 23
(2) Administrative and general expenses were up $8.2 million (14 percent)
due to higher costs associated with the Company's growing workforce.
(3) The Company recorded provisions for impairments of international
properties of $5.4 million in 1996. (These impairments were offset by
the gain on the sale of the Company's Indonesia assets of $19.4
million.) The 1996 impairments reflect costs associated with the review
and study of potential exploration projects in China and several other
foreign countries that the Company has elected not to pursue. This
compares to $2.6 million of provisions for impairment of international
and geothermal properties in 1995.
INTEREST EXPENSE
<TABLE>
<CAPTION>
1997 1996 1995
millions ------ ------ ------
<S> <C> <C> <C>
Gross interest expense $ 62.1 $ 56.0 $ 52.6
Capitalized interest (21.1) (17.0) (16.2)
------ ------ ------
Net interest expense $ 41.0 $ 39.0 $ 36.4
------ ------ ------
</TABLE>
INTEREST EXPENSE Anadarko's gross interest expense has increased 18 percent
over the past three years due primarily to higher levels of borrowings for
capital expenditures, including producing property acquisitions. Gross interest
expense in 1997 was up 11 percent compared to 1996 primarily due to higher
average borrowings in 1997. Gross interest expense in 1996 increased six percent
compared to 1995 primarily due to higher average borrowings during 1996. See
Liquidity and Long-term Debt.
ANALYSIS OF VOLUMES AND PRICES
ANNUAL VOLUMES AND U.S. AVERAGE PRICES
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
NATURAL GAS (BCF) 178.7 164.9 171.7
MMcf/d 490 450 471
Price per Mcf $ 2.30 $ 2.13 $ 1.42
CRUDE OIL AND CONDENSATE (MBBLS) 9,083 6,702 7,435
MBbls/d 25 18 20
Price per barrel $18.03 $20.21 $16.52
NATURAL GAS LIQUIDS (MBBLS) 5,467 3,514 3,580
MBbls/d 15 10 10
Price per barrel $14.64 $16.86 $12.81
</TABLE>
- ---------------
Bcf -- billion cubic feet
MMcf/d -- million cubic feet per day
Mcf -- thousand cubic feet
MBbls -- thousand barrels
MBbls/d -- thousand barrels per day
NATURAL GAS Anadarko's natural gas production volumes increased eight percent
in 1997 compared to 1996, primarily due to increased drilling activity in core
U.S. onshore and offshore areas of operation. Anadarko's natural gas volumes in
1996 decreased four percent compared to 1995 production primarily due to sales
of producing properties in 1995 and natural decline. The Company's average U.S.
wellhead gas price in 1997 was up eight percent from 1996. Anadarko's average
U.S. wellhead gas price in 1996 had increased 50 percent from 1995.
22
<PAGE> 24
Natural gas markets were extremely volatile in 1997, with the Company's
average monthly price fluctuating from a low of $1.61 per Mcf in March 1997 to a
high of $3.84 per Mcf in January 1997. Prices for natural gas weakened
significantly in late 1997 due to a lack of cold weather in major population
centers in the northeast. Natural gas markets were also extremely volatile in
1996, with the Company's average monthly price fluctuating from a low of $1.66
per Mcf in September 1996 to a high of $3.49 per Mcf in December 1996. Anadarko
employs marketing strategies to help manage production and sales volumes and
mitigate the effect of the price volatility that is likely to continue. See
Marketing Strategies -- Use of Derivatives.
QUARTERLY NATURAL GAS VOLUMES AND U.S. AVERAGE PRICES
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
FIRST QUARTER
Bcf 42.3 43.7 41.3
MMcf/d 470 480 459
Price per Mcf $2.66 $1.96 $1.30
SECOND QUARTER
Bcf 43.8 40.4 43.5
MMcf/d 481 444 479
Price per Mcf $1.85 $2.04 $1.46
THIRD QUARTER
Bcf 45.4 39.8 42.3
MMcf/d 494 433 460
Price per Mcf $2.02 $1.95 $1.27
FOURTH QUARTER
Bcf 47.2 41.0 44.5
MMcf/d 513 446 484
Price per Mcf $2.67 $2.56 $1.64
</TABLE>
CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS Due primarily to increased
drilling activity in the Permian Basin and production from the Mahogany Field,
Anadarko's crude oil and condensate production in 1997 increased 36 percent from
1996. The 1996 oil and condensate production volumes declined 10 percent
compared to 1995, due primarily to property sales in 1994 and 1995 and normal
production declines associated with mature oil fields.
Anadarko's average U.S. crude oil price for 1997 decreased 11 percent
compared to 1996. Crude oil prices in 1996 were up 22 percent compared to 1995.
Crude oil prices weakened significantly late in 1997 due to several factors,
including: lack of cold weather, higher storage inventories and perceptions of
the impact of increased quotas from the Organization of Petroleum Exporting
Countries (OPEC).
Generally, the Company's oil production is sold on a monthly basis as it is
produced. Production of oil usually is not affected by seasonal swings in demand
or in market prices.
The Company's NGLs sales volumes in 1997 increased 56 percent compared to
1996 primarily due to new and restructured NGLs processing contracts. NGLs
production volumes in 1996 decreased two percent compared to 1995 volumes. The
1997 average NGLs price was down 13 percent compared to 1996. By comparison,
1996 NGLs prices were 32 percent higher when compared to 1995.
23
<PAGE> 25
MARKETING STRATEGIES
NATURAL GAS The U.S. natural gas market has grown significantly throughout the
last 10 years and management believes continued growth to be likely. Natural gas
prices have been extremely volatile and are expected to continue to be so.
Management believes the Company's excellent portfolio of exploration and
development prospects should position Anadarko to continue to participate in
this growth.
Anadarko's wholly-owned marketing subsidiary -- Anadarko Energy Services
Company (AES) -- is a full-service marketing company offering supply assurance,
competitive pricing and services tailored to its customers needs. Most of the
Company's gas production is sold through AES. In recent years, the Company has
also purchased and sold third-party gas in the Company's market areas.
AES sells natural gas under a variety of contracts and may also receive a
service fee related to the level of reliability and service required by the
customer. AES has expanded its marketing capabilities to move larger volumes of
gas into and out of the "daily" gas market to take advantage of any price
volatility. Included in this strategy is the use of leased natural gas storage
facilities and various hedging strategies to better manage price risk associated
with natural gas sales. See Use of Derivatives.
CRUDE OIL AND CONDENSATE Currently, all of Anadarko's revenues are derived from
domestic production. Presently, the Company's crude oil production is sold on
30-day "evergreen" contracts with prices based on postings plus a premium.
Initial production from the Hassi Berkine South (HBNS) Field in Algeria is
expected in May 1998. Anadarko has been identifying markets for this new oil
production. Oil from the HBNS Field will be lifted by tanker load and sold as
Saharan Blend to customers primarily in the Mediterranean area. Saharan Blend is
a very light, sweet, low sulfur crude that provides refiners with large
quantities of high quality jet and diesel fuel. The first cargo is expected to
be lifted in June 1998, with revenues reflected in the Company's second quarter
results.
GAS GATHERING SYSTEMS AND PROCESSING PLANTS Anadarko's investment in gas
gathering operations allows the Company to better manage its gas production,
improve ultimate recovery of reserves, enhance the value of reserves and expand
marketing opportunities. The Company has invested about $104 million to build or
acquire gas gathering systems over the last five years. Anadarko owns and
operates four major gas gathering systems in the Company's core producing areas.
In March 1996, Anadarko closed on the second of two acquisitions from
PanEnergy Corp, formerly Panhandle Eastern Corporation. The purchase price of
the two systems was about $35 million. These two gathering systems tripled the
Company's overall gas gathering capacity to over 480 MMcf/d and serve about
1,500 wells. Approximately 80 percent of the gas flowing through these systems
is from Anadarko-operated wells. During 1997, Anadarko made capital improvements
to lower line pressure and increase deliverability from systems in southwest
Kansas. A major component of this investment was the installation of rotary
screw compressors to help lower line pressures at the wellhead.
During 1997, the Company shut down its last fully owned and operated gas
processing facility. The Company also sold its interests in three other plants
during 1997. The Company has elected to have its gas processed by third parties,
increasing the Company's net NGLs production volumes. The increased revenues
were partially offset by higher operating expenses. At the end of 1997, Anadarko
did not have any barrels of NGLs in inventory compared to 4,600 barrels of NGLs
at the end of 1996.
24
<PAGE> 26
USE OF DERIVATIVES Anadarko produces, purchases and sells natural gas, crude
oil, and NGLs. As a result, Anadarko's financial results can be significantly
affected by changes in these commodity prices. Anadarko uses derivative
financial instruments to hedge the Company's exposure to changes in the market
price of natural gas and crude oil, to provide methods to fix the price for
natural gas independently of the physical purchase or sale and to manage
interest rates. Commodity financial instruments also provide methods to meet
customer pricing requirements while achieving a price structure consistent with
the Company's overall pricing strategy. While commodity financial instruments
are intended to reduce the Company's exposure to declines in the market price of
natural gas and crude oil, the commodity financial instruments may also limit
Anadarko's gain from increases in the market price of natural gas and crude oil.
As a result, gains and losses on commodity financial instruments are generally
offset by similar changes in the realized price of natural gas and crude oil.
Gains and losses are recognized in revenues for the periods to which the
commodity financial instruments relate. Anadarko's commodity financial
instruments currently are comprised of futures, swaps and options contracts. See
Notes 1 and 6 of the Notes to Consolidated Financial Statements under Item 8 of
this Form 10-K.
While the volume of derivative commodity instruments utilized by the
Company to hedge its market price risk can vary during the year within the
boundaries of its established policy guidelines, the fair value of those
instruments at December 31, 1997 was, in the judgment of the Company,
immaterial. Additionally, through the use of sensitivity analysis the Company
evaluates the potential effect that reasonably possible near term changes in the
market prices of natural gas and crude oil may have on the fair value of the
Company's derivative commodity instruments. Based upon an analysis utilizing the
actual derivative contractual volumes and assuming a ten percent adverse
movement in commodity prices, the potential decrease in the fair value of the
derivative commodity instruments at December 31, 1997 does not have a material
adverse effect on the financial position or results of operations of the
Company.
The Company also evaluated the potential effect that reasonably possible
near term changes in interest rates may have on the fair value of the Company's
interest rate swap agreement. Based upon an analysis utilizing the actual
interest rate in effect as of December 1997 and assuming a ten percent increase
in interest rates, the potential decrease in the fair value of the derivative
interest swap instrument at December 31, 1997 does not have a material effect on
the financial position or results of operations of the Company.
25
<PAGE> 27
OPERATING RESULTS
DRILLING ACTIVITY During 1997, Anadarko participated in a total of 646 gross
wells, including 401 oil wells, 182 gas wells and 63 dry holes. This compares to
283 gross wells (166 oil wells, 65 gas wells and 52 dry holes) in 1996 and 258
wells (114 oil wells, 98 gas wells and 46 dry holes) in 1995. Despite the
significant increase in drilling activity, the Company's success rate in
exploratory and development drilling increased, demonstrating the high-quality
of Anadarko's core property areas.
During 1997, the Company made several significant well completions in its
exploration and development drilling program which are discussed in the
narrative descriptions on pages 8 through 20 of the 1997 Annual Report to
Stockholders, incorporated herein by reference, and Properties and Activities
under Item 1 of this Form 10-K.
DRILLING PROGRAM ACTIVITY
<TABLE>
<CAPTION>
GAS OIL DRY TOTAL
----- ----- ---- -----
<S> <C> <C> <C> <C>
1997 EXPLORATORY
Gross 3 14 9 26
Net 2.0 7.9 5.1 15.0
1997 DEVELOPMENT
Gross 179 387 54 620
Net 149.6 284.9 50.9 485.4
1996 EXPLORATORY
Gross 7 8 11 26
Net 4.9 3.4 6.3 14.6
1996 DEVELOPMENT
Gross 58 158 41 257
Net 38.3 125.2 37.9 201.4
</TABLE>
- ---------------
Gross: total wells in which there was participation.
Net: working interest ownership.
RESERVE REPLACEMENT Drilling activity is not the best measure of success for an
exploration and production company. Anadarko focuses on growth and
profitability. Reserve replacement is the key to growth and future profitability
depends on the cost of finding oil and gas reserves. The Company believes its
performance in both areas is excellent. For the 16th consecutive year, Anadarko
more than replaced annual production volumes with proved reserves of natural
gas, crude oil, condensate and NGLs, stated on an energy equivalent barrel (EEB)
basis.
During 1997, Anadarko's worldwide reserve replacement was 341 percent of
total production, or 44.3 million energy equivalent barrels (EEBs). The
Company's worldwide reserve replacement in 1996 was 299 percent of total
production, which was 37.7 million EEBs. The Company's worldwide reserve
replacement in 1995 was 226 percent of total production. Over the last five
years, the Company's annual reserve replacement has averaged 270 percent of
annual production volumes.
Anadarko continues to increase its energy reserves in the U.S. while the
nation's energy reserves are steadily declining. In 1997, the Company replaced
206 percent of its U.S. production volumes with U.S. reserves. This compares to
a reserve replacement of 215 percent of production volumes in 1996. The
Company's U.S. reserve replacement for the five-year period 1993-97 was 183
percent of U.S. production. By comparison, the most recent published U.S.
industry average (1992-96) was 92 percent. (Source: Department of Energy)
Anadarko's U.S. reserve replacement performance for the same period 1992-96 was
183 percent of production. Industry data for 1997 are not yet available.
26
<PAGE> 28
COST OF FINDING Cost of finding results in any one year can be misleading due
to the long lead times associated with exploration and development. A better
measure of cost of finding performance is over a five-year period. Anadarko has
consistently outperformed the industry in average finding costs. For the period
1993-97, Anadarko's U.S. cost of finding was $3.88 per EEB. Anadarko's worldwide
finding cost for the same five-year period was $3.28 per EEB. Industry data for
1997 are not yet available. For comparison purposes, the most recent published
five-year average (1992-96) for the industry shows U.S. average cost of finding
was $4.67 per EEB and worldwide cost of finding was $4.81 per EEB. (Source:
Arthur Andersen, SC) For the same period, Anadarko's U.S. finding cost was $3.78
per EEB and worldwide finding cost was $3.25 per EEB. The Company's low
worldwide finding costs are due to the success of the Company's exploration
programs.
For 1997, Anadarko's worldwide finding cost for proved reserves was $4.28
per EEB compared to $2.76 per EEB in 1996 and $2.74 per EEB in 1995. Anadarko's
U.S. finding cost for 1997 was $4.79 per EEB compared to $3.23 per EEB in 1996
and $4.26 per EEB in 1995.
PROVED RESERVES At the end of 1997, Anadarko's proved reserves were 708.0
million EEBs compared to 601.3 million EEBs at year-end 1996 and 526.3 million
EEBs at year-end 1995. Reserves increased by 18 percent in 1997 compared to 1996
primarily due to exploration and development drilling in both the U.S. and
overseas, as well as improved recovery in the U.S. Anadarko's proved reserves
have grown by 35 percent over the past three years, primarily as a result of
successful exploration projects in Algeria, the Gulf of Mexico and Alaska, as
well as successful exploitation and development drilling programs in major
domestic fields in core areas onshore and offshore.
The Company's proved natural gas reserves at year-end 1997 were 1.73
trillion cubic feet (Tcf) compared to 1.82 Tcf at year-end 1996 and 1.84 Tcf at
year-end 1995. Anadarko's proved U.S. gas reserves have declined six percent
since year-end 1995. Anadarko's crude oil, condensate and NGLs reserves at
year-end 1997 increased 41 percent to 419.7 million barrels (MMBbls) compared to
297.8 MMBbls at year-end 1996 and 219.2 MMBbls at year-end 1995. Crude oil
reserves have nearly doubled over the last three years primarily due to large
discoveries in Algeria, the Gulf of Mexico and Alaska. Crude oil, condensate and
NGLs reserves now comprise 59 percent of the Company's proved reserves compared
to about 50 percent at year-end 1996 and 42 percent at year-end 1995. Creating
balance between crude oil reserves and natural gas reserves is a key strategy
for the Company.
The Company emphasizes that the volumes of reserves are estimates which, by
their nature, are subject to revision. The estimates are made using all
available geologic and reservoir data as well as production performance data.
These estimates are reviewed annually and revised, either upward or downward, as
warranted by additional performance data.
At December 31, 1997, the present value (discounted at 10 percent) of
future net revenues from Anadarko's proved reserves was $3.0 billion, before
income taxes, and was $2.0 billion, after income taxes, (stated in accordance
with the regulations of the Securities and Exchange Commission and Financial
Accounting Standards Board). The 1997 estimated present value of future net
revenues, after income taxes, decreased 41 percent compared to 1996 primarily
due to decreases in commodity prices for oil and gas at year-end 1997 and
partially offset by additions of proved reserves related to successful drilling
worldwide. Further declines in commodity prices could negatively impact the
carrying value of the Company's oil and gas properties. See Supplemental
Information on Oil and Gas Exploration and Production Activities in the
Consolidated Financial Statements under Item 8 of this Form 10-K.
The present value of future net revenues does not purport to be an estimate
of the fair market value of Anadarko's proved reserves. An estimate of fair
value would also take into account, among other things, anticipated changes in
future prices and costs, the expected recovery of reserves in excess of proved
reserves and a discount factor more representative of the time value of money
and the risks inherent in producing oil and gas.
27
<PAGE> 29
ACQUISITIONS AND DIVESTITURES
Several years ago, the Company embarked on an asset management program to
sell "non-core" properties and invest the proceeds into core operating areas
around the world in order to focus financial resources and personnel on the
Company's core areas of operation. Over the past three years, the Company has
sold properties, either as a strategic exit or by asset rationalization in
existing core areas, with proceeds totaling $114 million. Reserves associated
with these sales and trades are 31.6 million EEBs. During the same time period,
Anadarko has acquired through purchases and trades 18.9 million EEBs of proved
reserves for $62.3 million.
During 1997, Anadarko sold reserves of about one million EEBs in several
transactions with sales proceeds totaling $6.2 million. The largest component
was the sale of the Company's Norden Ltd. Partnership in late 1997 for $5.8
million. In 1997, acquisitions of producing properties totaled $31.0 million and
8.0 million EEBs. The largest acquisition was a package of properties in the
West Panhandle Field of Texas for $18.5 million, which accounted for 4.2 million
EEBs of proved reserves. This purchase provides the Company producing properties
with significant development potential as well as settling a disputed claim on
revenues.
During 1996, Anadarko sold reserves of 18.7 million EEBs, of which 17.7
million EEBs were attributed to the Company's interests in Indonesia. Total
proceeds from divestitures in 1996 amounted to $41 million. In 1996,
acquisitions of producing properties totaled $5.3 million and 1.1 million EEBs.
The largest acquisition was a package of properties in the Oklahoma panhandle
portion of the Hugoton Embayment.
Total 1995 proceeds from divestitures were $66.6 million, which included
assets in north Texas and the Permian Basin of southeast New Mexico and west
Texas. Reserves sold equaled 11.9 million EEBs. The largest sale in 1995 was the
Company's interest in 25 "non-strategic" fields to other operators for $56.8
million. In 1995, Anadarko acquired 9.8 million EEBs of reserves at a cost of
$26 million. The largest acquisition was a package of properties in west Texas
purchased from Shell Western E&P. The Company also purchased for $9.5 million a
water supply system in west Texas which reduced operating costs and enabled
expansions of several important waterflood projects.
RECENT DEVELOPMENTS
In March 1998, Anadarko announced plans to acquire certain producing
properties and related assets from OXY USA, Inc. in a transaction valued at
about $120 million. The properties are located in the Anadarko Basin of central
Oklahoma, which has been a core operating area of the Company for nearly 40
years.
Under the terms of the agreement, Anadarko will purchase working interests
in five oil and gas fields covering 37,000 acres with 370 production and
injection wells. Current net production from the fields is about 2.6 MBbls/d and
5.4 MMcf/d of gas. The acquisition also includes an interest in a 120 mile,
eight-inch diameter pipeline that delivers carbon dioxide to the fields.
Anadarko estimates that the properties contain proved reserves of about 20
million EEBs. The transaction is expected to close by April 1998. The purchase
will be funded as part of the 1998 capital spending program.
28
<PAGE> 30
PRODUCING PROPERTIES AND LEASES
The Company owns 2,561 net producing oil wells and 1,973 net producing gas
wells worldwide. The following schedule shows the number of developed and
undeveloped acres in which Anadarko held interests at December 31, 1997.
ACREAGE
<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED TOTAL
--------------- --------------- ---------------
GROSS NET GROSS NET GROSS NET
thousands ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
United States
Onshore 1,035 790 1,286 523 2,321 1,313
Offshore 187 54 437 235 624 289
----- ----- ----- ----- ----- -----
Total 1,222 844 1,723 758 2,945 1,602
----- ----- ----- ----- ----- -----
Algeria -- -- 5,292 2,324 5,292 2,324
Eritrea -- -- 9,000 6,300 9,000 6,300
Jordan -- -- 4,200 2,100 4,200 2,100
Peru -- -- 2,557 2,557 2,557 2,557
North Atlantic Margin -- -- 1,274 377 1,274 377
Tunisia -- -- 384 96 384 96
China -- -- 2,100 1,050 2,100 1,050
</TABLE>
REGULATORY MATTERS
ENVIRONMENTAL The Company's oil and gas operations and properties are subject
to numerous federal, state and local laws and regulations relating to
environmental protection. These laws and regulations govern, among other things,
the amounts and types of substances and materials that may be released into the
environment, the issuance of permits in connection with drilling and production
activities, the discharge and disposition of waste materials, offshore oil and
gas operations, the reclamation and abandonment of wells and facility sites and
the remediation of contaminated sites. In addition, these laws and regulations
may impose substantial liabilities for the Company's failure to comply with them
or for any contamination resulting from the Company's operations.
Anadarko takes the issue of environmental stewardship very seriously and
works diligently to comply with applicable environmental rules and regulations.
Compliance with such laws and regulations has not had a material adverse effect
on the Company's operations or financial condition in the past. However, because
environmental laws and regulations are becoming increasingly more stringent,
there can be no assurances that such laws and regulations or any environmental
law or regulation enacted in the future will not have a material adverse effect
on the Company's operations or financial condition.
For a description of certain environmental proceedings in which the Company
is involved, see Note 15 of the Notes to Consolidated Financial Statements under
Item 8 of this Form 10-K.
OTHER Regulatory agencies in certain states have authority to issue permits for
the drilling of wells, regulate the spacing of wells, prevent the waste of oil
and gas resources through proration and regulate environmental matters.
Operations conducted by the Company on federal oil and gas leases must
comply with numerous regulatory restrictions, including various
nondiscrimination statutes. Additionally, certain operations must be conducted
pursuant to appropriate permits issued by the Bureau of Land Management and the
Minerals Management Service of the Department of Interior and, with regard to
certain federal leases, with prior approval of drill site locations by the
Environmental Protection Agency. In addition to the standard permit process,
federal leases may require a complete environmental impact assessment prior to
authorizing an exploration or development plan.
29
<PAGE> 31
ADDITIONAL FACTORS AFFECTING BUSINESS
The Company has made in this report, and may from time to time otherwise make in
other public filings, press releases and discussions with Company management,
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 concerning
the Company's operations, economic performance and financial condition. These
forward looking statements include information concerning future production and
reserves, contributions from Algerian properties, and those statements preceded
by, followed by or that otherwise include the words "believes", "expects",
"anticipates", "intends", "estimates", "projects", "target", "goal", "plans",
"objective", "should" or similar expressions or variations on such expressions.
For such statements, the Company claims the protection of the safe harbor for
forward looking statements contained in the Private Securities Litigation Reform
Act of 1995. Such statements are subject to various risks and uncertainties, and
actual results could differ materially from those expressed or implied by such
statements due to a number of factors in addition to those discussed elsewhere
in this Form 10-K and in the Company's other public filings, press releases and
discussions with Company management, including:
COMMODITY PRICING AND DEMAND Crude oil prices continue to be affected by
political developments worldwide, pricing decisions and production quotas of
OPEC and the volatile trading patterns in the commodity futures markets. Natural
gas prices also continue to be highly volatile. In periods of sharply lower
commodity prices, the Company may curtail production and capital spending
projects, as well as delay or defer drilling wells in certain areas because of
lower cash flows. Changes in crude oil and natural gas prices can impact the
Company's determination of proved reserves and the Company's calculation of the
standardized measure of discounted future net cash flows relating to oil and gas
reserves. In addition, demand in the United States and worldwide may affect the
Company's level of production.
EXPLORATION AND OPERATING RISKS The Company's business is subject to all of the
operating risks normally associated with the exploration for and production of
oil and gas, including blowouts, cratering and fire, each of which could result
in damage to or destruction of oil and gas wells or formations or production
facilities and other property and injury to persons. As protection against
financial loss resulting from these operating hazards, the Company maintains
insurance coverage, including certain physical damage, employer's liability,
comprehensive general liability and worker's compensation insurance. Although
Anadarko is not fully insured against all risks in its business, the Company
believes that the coverage it maintains is customary for companies engaged in
similar operations. The occurrence of a significant event against which the
Company is not fully insured could have a material adverse effect on the
Company's financial position.
DEVELOPMENT RISKS The Company is increasingly involved in large development
projects. Key factors that may affect the timing and outcome of such projects
include: project approvals by joint venture partners; timely issuance of permits
and licenses by host country governmental agencies; manufacturing and delivery
schedules of critical equipment; and commercial arrangements for pipelines and
related equipment to transport and market hydrocarbons. In large development
projects, these uncertainties are usually resolved, but delays and differences
between estimated timing and actual timing of critical events are commonplace
and may, therefore, affect the forward-looking statements related to large
development projects.
DOMESTIC GOVERNMENTAL RISKS The domestic operations of the Company have been,
and at times in the future may be, affected by political developments and by
federal, state and local laws and regulations such as restrictions on
production, changes in taxes, royalties and other amounts payable to governments
or governmental agencies, price or gathering rate controls and environmental
protection regulations.
30
<PAGE> 32
FOREIGN OPERATIONS RISK The Company's operations in areas outside the United
States are subject to various risks inherent in foreign operations. These risks
may include, among other things, loss of revenue, property and equipment as a
result of hazards such as expropriation, war, insurrection and other political
risks, increases in taxes and governmental royalties, renegotiation of contracts
with governmental entities, changes in laws and policies governing operations of
foreign-based companies, currency restrictions and exchange rate fluctuations
and other uncertainties arising out of foreign government sovereignty over the
Company's international operations. The Company's international operations may
also be adversely affected by laws and policies of the United States affecting
foreign trade and taxation. To date, the Company's international operations have
not been materially affected by these risks.
COMPETITION The oil and gas business is highly competitive in the search for
and acquisition of reserves and in the gathering and marketing of oil and gas
production. The Company's competitors include the major oil companies,
independent oil and gas concerns, individual producers, gas marketers and major
pipeline companies, as well as participants in other industries supplying energy
and fuel to industrial, commercial and individual consumers. Competition for
drilling rigs is keen. Over the last three years, the Company experienced
increases in drilling rig rental rates due to the tight rig market around the
world.
YEAR 2000 Anadarko has assessed the impact of the year 2000 on its computer
systems and applications and has developed a plan to ensure that all information
systems will handle the millennium date change. As of year-end 1997, about 80
percent of Anadarko's information systems were already year 2000 compliant and
an additional 19 percent will be year 2000 compliant by the end of 1998. There
were no significant expenditures in 1997 for the year 2000 conversion. The
Company does not expect any incremental expenditures to complete the year 2000
conversion to be significant. The Company is in the process of initiating formal
communications with its significant suppliers and large customers to determine
the extent to which the Company's operations may be potentially vulnerable to
those third parties' failure to prepare for the year 2000 change.
KANSAS AD VALOREM TAX The Natural Gas Policy Act of 1978 (NGPA) allowed a
"severance, production or similar" tax to be included as an add-on, over and
above the maximum lawful price for natural gas. Based on the Federal Energy
Regulatory Commission (FERC) ruling that the Kansas ad valorem tax was such a
tax, the Company collected the Kansas ad valorem tax in addition to the
otherwise maximum lawful price. FERC's ruling was appealed to the United States
Court of Appeals for the District of Columbia (D.C. Circuit), which held in 1988
that FERC failed to provide a reasoned basis for its findings and remanded the
case to FERC for further consideration. In 1993, FERC issued an order reversing
its prior ruling, but limiting the effect of its decision to Kansas ad valorem
taxes for sales made on or after June 28, 1988. FERC's 1993 order was appealed.
In 1996, the D.C. Circuit issued a decision which requires refunds with respect
to production since October 1983.
For a description of the court proceedings that have occurred, additional
action taken by FERC and litigation filed by the Company as a result of the D.C.
Circuit 1996 decision, see information appearing under Kansas Ad Valorem Tax
under Item 3 of this Form 10-K.
31
<PAGE> 33
CAPITAL EXPENDITURES, LIQUIDITY AND LONG-TERM DEBT
CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
1997 1996 1995
millions ------ ------ ------
<S> <C> <C> <C>
Exploration $184.8 $141.8 $ 97.9
Development 346.4 148.9 96.8
Acquisitions of producing properties 31.0 5.3 26.0
Gathering and other 36.0 64.0 52.4
Interest and overhead 88.0 67.2 58.1
------ ------ ------
Total $686.2 $427.2 $331.2
------ ------ ------
</TABLE>
CAPITAL EXPENDITURES Anadarko's total capital spending in 1997 was $686
million, an increase of 61 percent over 1996 capital spending of $427 million
and more than double 1995 capital spending of $331 million. Anadarko's record
capital investment program in 1997 reflects increased activities in all core
areas of operation during the year. The largest categories of capital spending
in 1997, 1996 and 1995 were for exploration and development activities in the
U.S. and overseas. The Company funded its capital investment program in 1997,
1996 and 1995 primarily through cash flow, plus increases in long-term debt and
proceeds from property sales.
Capital spending for 1998 has been set at about $790 million, an increase
of 15 percent over 1997 and the highest anticipated spending level in Company
history. The higher capital budget is driven by increased opportunities in both
U.S. and international exploration and development drilling programs. The 1998
budget includes $198 million for exploration, $448 million for development and
acquisitions of producing properties, $41 million for gathering and other, and
$103 million for capitalized interest and overhead.
The Company believes cash flows, including proceeds from divestitures,
issuances of additional debt or securities, and existing credit facilities will
be sufficient to meet capital and operating requirements, including any
contingencies, during 1998.
LIQUIDITY AND LONG-TERM DEBT At year-end 1997, Anadarko's total debt was $956
million. This compares to year-end 1996 total debt of $731 million. Anadarko's
total debt has increased primarily because of capital requirements related to
development operations in Algeria and Alaska.
In January 1997, the Company entered into a sale-leaseback agreement for
$88.3 million (net) involving 145 natural gas compressors in Anadarko's major
mid-continent gathering systems. The transaction monetized Company assets and
took advantage of low interest rates. Proceeds from the transaction were used
for general corporate purposes.
In January 1998, Anadarko issued $100 million principal amount of 6.625%
Debentures due 2028. The money will be used to fund capital spending projects in
core operating areas.
In November 1997, the Company issued $100 million principal amount of 7%
Debentures due 2027. Net proceeds from the offering were used to repay floating
interest rate debt.
In July 1997, Anadarko filed a shelf registration statement with the
Securities and Exchange Commission that permits the issuance of up to $300
million in senior and subordinated debt securities and equity securities. Net
proceeds, terms and pricing of offerings of securities issued under the shelf
registration statement will be determined at the time of the offering. Anadarko
has used similar shelf registration statements since 1989 to provide added
flexibility in financing strategies. As of January 31, 1998, $200 million
principal amount of securities had been issued under the shelf registration.
In June 1997, the Company's Revolving Credit Agreement and 364-Day Credit
Agreement were amended. The Agreements were amended as follows: the principal
amounts of the Agreements were reduced from $250 million and $150 million,
respectively, to $225 million and $125 million, respectively; the number of
commercial banks in the group was changed from 11 to eight; and, the expiration
dates of the Agreements were extended for one year. During 1996 and 1997, there
were no outstanding borrowings under these Agreements.
32
<PAGE> 34
During 1996, Anadarko offered two "Century Bonds". In September 1996, the
Company issued $100 million principal amount of 7.73% Debentures due 2096. Each
Debenture holder has the one-time right to have the Company purchase on
September 15, 2026, all or a portion of, the Debentures at a purchase price
equal to par plus accrued and unpaid interest. In November 1996, the Company
issued $100 million principal amount of 7 1/4% Debentures due November 15, 2096.
During 1996, Anadarko entered into a 10-year swap agreement with a notional
value of $100 million whereby the Company receives a fixed interest rate and
pays a floating interest rate indexed to 3-month LIBOR. This agreement was
entered into to offset a portion of the effect of the Company's fixed-rate long-
term debt financed in 1996.
Anadarko's net cash from operating activities in 1997 was up 15 percent to
$362 million compared to $315 million in 1996 and $248 million in 1995.
CHANGES IN ACCOUNTING PRINCIPLES
COMPREHENSIVE INCOME Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income", establishes standards for reporting and
display of comprehensive income and its components. SFAS No. 130 is effective
for fiscal years beginning after December 15, 1997. Anadarko does not expect the
adoption of SFAS No. 130 to have any effect on the Company's reported
consolidated net income.
SEGMENT REPORTING SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", establishes standards for reporting information about
operating segments in annual financial statements and requires certain
information about operating segments in interim financial statements. The
Company plans to adopt SFAS No. 131 for the year ended December 31, 1998.
DIVIDENDS
In 1997, Anadarko paid $17.9 million in dividends to its common
stockholders (7.5 cents per share per quarter). The dividend amount was $17.8
million in 1996 (7.5 cents per share per quarter) and $17.7 million in 1995 (7.5
cents per share per quarter). Anadarko has paid a dividend continuously since
becoming an independent company in 1986.
The Revolving Credit Agreement and the 364-Day Credit Agreement require a
minimum balance of $650 million to be maintained in retained earnings. As a
result, the amount of retained earnings available for dividends as of December
31, 1997 was $466.8 million. The amount of future dividends will depend on
earnings, financial condition, capital requirements and other factors, and will
be determined by the Board of Directors on a quarterly basis.
33
<PAGE> 35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANADARKO PETROLEUM CORPORATION
INDEX
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Management 35
Independent Auditors' Report 36
Statement of Income, Three Years Ended December 31, 1997 37
Balance Sheet, December 31, 1997 and 1996 38
Statement of Stockholders' Equity, Three Years Ended
December 31, 1997 39
Statement of Cash Flows, Three Years Ended December 31, 1997 40
Notes to Consolidated Financial Statements 41
Supplemental Quarterly Information 60
Supplemental Information on Oil and Gas Exploration and
Production Activities 61
</TABLE>
34
<PAGE> 36
ANADARKO PETROLEUM CORPORATION
REPORT OF MANAGEMENT
The management of Anadarko Petroleum Corporation is responsible for the
preparation and integrity of all information contained in the accompanying
consolidated financial statements. The financial statements have been prepared
in conformity with generally accepted accounting principles appropriate in the
circumstances. In preparing the financial statements, management makes informed
judgments and estimates.
Management maintains and relies on the Company's system of internal
accounting controls. Although no system can ensure elimination of all errors and
irregularities, this system is designed to provide reasonable assurance that
assets are safeguarded, transactions are executed in accordance with
management's authorization and accounting records are reliable as a basis for
the preparation of financial statements. This system includes the selection and
training of qualified personnel, an organizational structure providing
appropriate delegation of authority and division of responsibility, the
establishment of accounting and business policies for the Company and the
conduct of internal audits.
The Board of Directors pursues its responsibility for the consolidated
financial information through its Audit Committee, which is composed solely of
directors who are not officers or employees of Anadarko. The Audit Committee
recommends to the Board of Directors the selection of independent auditors and
reviews their fee arrangements. The Audit Committee meets periodically with
management, the internal auditors and the independent auditors to review that
each is carrying out its responsibilities. The internal and independent auditors
have full and free access to the Audit Committee to discuss auditing and
financial reporting matters.
We believe that Anadarko's policies and procedures, including its system of
internal accounting controls, provide reasonable assurance that the financial
statements are prepared in accordance with the applicable securities laws.
/s/ ROBERT J. ALLISON
Robert J. Allison, Jr.
Chairman, President and
Chief Executive Officer
/s/ MICHAEL E. ROSE
Michael E. Rose
Senior Vice President and
Chief Financial Officer
35
<PAGE> 37
ANADARKO PETROLEUM CORPORATION
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Anadarko Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of Anadarko
Petroleum Corporation and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1997, as
contained in the 1997 Form 10-K Annual Report. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Anadarko
Petroleum Corporation and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Houston, Texas
January 29, 1998
36
<PAGE> 38
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1997 1996 1995
----------------------- -------- -------- --------
thousands except per share
amounts
<S> <C> <C> <C>
REVENUES
Gas sales $417,973 $362,599 $259,849
Oil and condensate sales 168,591 139,936 125,980
Natural gas liquids and other 86,637 66,493 48,185
-------- -------- --------
Total 673,201 569,028 434,014
-------- -------- --------
COSTS AND EXPENSES
Operating expenses Note 10 154,657 115,308 105,829
Administrative and general 73,569 67,673 59,477
Depreciation, depletion and amortization 198,821 167,183 164,742
Other taxes Note 11 42,774 37,205 36,892
(Gains) and impairments related to international and
geothermal properties, net Notes 2 and 5 -- (13,986) 2,600
-------- -------- --------
Total 469,821 373,383 369,540
-------- -------- --------
Operating Income 203,380 195,645 64,474
OTHER INCOME AND (EXPENSES)
Other income 1,938 1,118 1,150
Interest expense Notes 5 and 6 (40,959) (38,973) (36,358)
-------- -------- --------
Income before Income Taxes 164,359 157,790 29,266
INCOME TAXES Note 12 57,041 57,070 8,231
-------- -------- --------
NET INCOME $107,318 $100,720 $ 21,035
-------- -------- --------
PER COMMON SHARE
Net income - basic Notes 1 and 7 $ 1.80 $ 1.70 $ 0.36
Net income - diluted Notes 1 and 7 $ 1.78 $ 1.69 $ 0.36
Dividends Note 7 $ 0.30 $ 0.30 $ 0.30
AVERAGE NUMBER OF SHARES OUTSTANDING Note 7 59,717 59,247 58,935
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE> 39
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996
----------- ---------- ----------
thousands
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents Note 3 $ 8,907 $ 14,601
Accounts receivable 177,157 226,824
Inventories Note 4 28,564 24,540
Prepaid expenses 4,366 3,843
---------- ----------
Total 218,994 269,808
---------- ----------
PROPERTIES AND EQUIPMENT
Original cost 4,669,251 4,036,165
Less accumulated depreciation, depletion and amortization 1,914,472 1,738,709
---------- ----------
Net properties and equipment -- based on the full cost
method of
accounting for oil and gas properties Note 5 2,754,779 2,297,456
---------- ----------
DEFERRED CHARGES 18,692 16,766
---------- ----------
$2,992,465 $2,584,030
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade and other $ 202,822 $ 244,219
Banks 22,102 17,995
Accrued expenses
Interest 13,607 12,812
Taxes and other 13,799 10,227
---------- ----------
Total 252,330 285,253
---------- ----------
LONG-TERM DEBT Note 6 955,733 731,049
---------- ----------
DEFERRED CREDITS
Deferred income taxes Note 12 546,792 498,973
Other Notes 6 and 7 120,830 54,675
---------- ----------
Total 667,622 553,648
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, par value $0.10
(200,000,000 shares authorized, 60,885,994 and 60,525,699
shares
issued as of December 31, 1997 and 1996, respectively) 6,134 6,098
Preferred stock, par value $1.00
(2,000,000 shares authorized, no shares issued as of
December 31, 1997 and 1996) -- --
Paid-in capital 353,125 335,848
Retained earnings (as of December 31, 1997, $466,780,000 was
not
restricted as to the payment of dividends) 828,787 739,395
Deferred compensation (11,203) (3,444)
Executives and Directors Benefits Trust, at market value
(1,000,000 shares as of December 31, 1997 and 1996) (60,063) (63,813)
Treasury stock (70 shares as of December 31, 1996) -- (4)
---------- ----------
Total 1,116,780 1,014,080
---------- ----------
COMMITMENTS AND CONTINGENCIES Notes 9, 13, 14 and 15 -- --
---------- ----------
$2,992,465 $2,584,030
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE> 40
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1997 1996 1995
----------------------- ---------- ---------- --------
thousands
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year $ 6,098 $ 6,047 $ 5,931
Common stock issued 36 51 116
---------- ---------- --------
Balance at end of year 6,134 6,098 6,047
---------- ---------- --------
PAID-IN CAPITAL
Balance at beginning of year 335,848 304,125 243,976
Common stock issued 21,027 22,035 6,124
Issuance of stock and revaluation to market for
Executives and Directors Benefits Trust (3,750) 9,688 54,025
---------- ---------- --------
Balance at end of year 353,125 335,848 304,125
---------- ---------- --------
RETAINED EARNINGS
Balance at beginning of year 739,395 656,455 653,112
Net income 107,318 100,720 21,035
---------- ---------- --------
846,713 757,175 674,147
Dividends paid (17,926) (17,780) (17,692)
---------- ---------- --------
Balance at end of year 828,787 739,395 656,455
---------- ---------- --------
DEFERRED COMPENSATION
Balance at beginning of year (3,444) (2,808) (3,420)
Issuance of restricted stock (10,065) (2,463) (1,106)
Amortization of restricted stock 2,306 1,827 1,718
---------- ---------- --------
Balance at end of year (11,203) (3,444) (2,808)
---------- ---------- --------
EXECUTIVES AND DIRECTORS BENEFITS TRUST
Balance at beginning of year (63,813) (54,125) --
Issuance of stock -- -- (42,375)
Revaluation to market 3,750 (9,688) (11,750)
---------- ---------- --------
Balance at end of year (60,063) (63,813) (54,125)
---------- ---------- --------
TREASURY STOCK
Balance at beginning of year (4) -- --
Purchase of treasury stock (802) (693) (427)
Issuance of treasury stock 806 689 427
---------- ---------- --------
Balance at end of year -- (4) --
---------- ---------- --------
STOCKHOLDERS' EQUITY Note 7 $1,116,780 $1,014,080 $909,694
---------- ---------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE> 41
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1997 1996 1995
----------------------- --------- --------- ---------
thousands
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 107,318 $ 100,720 $ 21,035
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 198,821 167,183 164,742
Amortization of restricted stock 2,306 1,827 1,718
Deferred income taxes 48,276 54,231 11,544
Provisions for impairments of international and
geothermal properties -- 5,400 2,600
--------- --------- ---------
356,721 329,361 201,639
(Increase) decrease in accounts receivable 49,667 (98,881) (12,762)
Increase in inventories (4,024) (9,681) (1,439)
Increase (decrease) in accounts payable -- trade and
other and accrued expenses (37,030) 89,634 63,760
Other items -- net (3,377) 4,108 (2,902)
--------- --------- ---------
Net cash provided by operating activities 361,957 314,541 248,296
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to properties and equipment (686,232) (427,234) (331,214)
Proceeds from the sale of assets to be leased, net 88,325 -- --
Sales and retirements of properties and equipment 8,389 46,178 62,847
--------- --------- ---------
Net cash used in investing activities (589,518) (381,056) (268,367)
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Additions to debt 224,684 200,000 205,100
Retirements of debt -- (142,959) (160,373)
Increase (decrease) in accounts payable, banks 4,107 5,146 (1,438)
Dividends paid (17,926) (17,780) (17,692)
Issuance of common stock 10,998 19,623 5,034
Issuance of treasury stock 806 689 427
Purchase of treasury stock (802) (693) (427)
--------- --------- ---------
Net cash provided by financing activities 221,867 64,026 30,631
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,694) (2,489) 10,560
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,601 17,090 6,530
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,907 $ 14,601 $ 17,090
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
40
<PAGE> 42
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF ACCOUNTING POLICIES
GENERAL Anadarko Petroleum Corporation is engaged in the exploration,
development, production and marketing of natural gas, crude oil, condensate and
natural gas liquids (NGLs). The terms "Anadarko" and "Company" refer to Anadarko
Petroleum Corporation and its subsidiaries. The principal subsidiaries of
Anadarko are: Anadarko Algeria Corporation (Anadarko Algeria), Anadarko Energy
Services Company and Anadarko Gathering Company.
PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATES The consolidated financial
statements include the accounts of Anadarko and its subsidiaries. All
significant intercompany transactions have been eliminated. The financial
statements have been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances. Certain amounts for prior years
have been restated to conform to the current presentation. In preparing
financial statements, management makes informed judgments and estimates that
affect the reported amounts of assets and liabilities as of the date of the
financial statements and affect the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from these estimates.
REVENUES Natural gas and NGLs revenues generally are recorded using the sales
method, whereby the Company recognizes revenues based on the amount of gas and
NGLs sold to purchasers on its behalf. Oil and condensate revenues are recorded
using the sales method, which approximates the entitlements method.
USE OF DERIVATIVES Anadarko uses derivative financial instruments to reduce the
Company's exposure to changes in the market price of natural gas and crude oil,
to fix the price for natural gas and crude oil independently of the physical
purchase or sale, and to manage interest rates. Commodity financial instruments
also provide methods to meet customer pricing requirements while achieving a
price structure consistent with the Company's overall pricing strategy. The
types of commodity derivative financial instruments currently used by Anadarko
are futures, swaps and options.
Anadarko utilizes the hedge or deferral method of accounting for commodity
derivative financial instruments (with the exception of certain written options)
whereby gains and losses on these hedging instruments are realized and recorded
as revenues on the income statement when the related natural gas or oil
production has been produced, purchased or delivered. As a result, gains and
losses on commodity financial instruments are generally offset by similar
changes in the realized prices of natural gas and crude oil. Unrealized gains
and losses on these hedging instruments are deferred and recorded as assets or
liabilities on the balance sheet at fair market value as of the balance sheet
date. The unrealized gains and losses include derivatives related to January
activities deferred as of December 31 and exclude certain written options
recognized during the year. All volumes shown exclude January hedges not open
and written options recognized. To qualify as hedging instruments, these
instruments must be highly correlated to anticipated future sales such that the
Company's exposure to the risks of commodity price changes is reduced. While
commodity financial instruments are intended to reduce the Company's exposure to
declines in market prices of natural gas and crude oil, the commodity financial
instruments may also limit Anadarko's gain from increases in the market price of
natural gas and crude oil.
Written options that are not combined with other offsetting instruments are
not classified as hedges. Unrealized losses on these written options, offset by
any option premiums received for these written options, are charged to the
income statement as a reduction to revenues on a current basis.
Gains and losses related to the Company's interest rate swap agreement are
included in interest expense on a current basis. The swap agreement effectively
converts a portion of the Company's fixed interest rate debt to variable
interest rate debt. See Note 6.
41
<PAGE> 43
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF ACCOUNTING POLICIES -- (CONTINUED)
PROPERTIES AND EQUIPMENT The Company uses the full cost method of accounting
for exploration and development activities as defined by the United States
Securities and Exchange Commission (SEC). Under this method of accounting, the
costs for unsuccessful, as well as successful, exploration and development
activities are capitalized as properties and equipment. This includes any
internal costs that can be directly identified with acquisition, exploration and
development activities, but does not include any costs related to production,
general corporate overhead or similar activities.
The sum of net capitalized costs and estimated future development and
dismantlement costs is amortized using the unit-of-production method. Excluded
from amounts subject to amortization are costs associated with unevaluated
properties and major development projects. On a country-by-country basis, should
the net capitalized costs exceed the estimated present value of future net cash
flows from proved oil and gas reserves, such excess costs would be charged to
current expense. Gain or loss on the sale or other disposition of oil and gas
properties is not recognized unless significant amounts of oil and gas reserves
are involved.
All other properties and equipment are stated at original cost, which does
not purport to represent replacement or market values.
ENVIRONMENTAL CONTINGENCIES The Company accrues for environmental contingencies
when liabilities are likely to occur and reasonable estimates can be made. These
estimates are not discounted. In accordance with full cost accounting rules, the
Company provides for environmental clean up costs associated with oil and gas
activities as a component of its depreciation, depletion and amortization
expense. Recoveries from third parties for environmental liabilities are not
recognized unless collection is probable.
INTEREST CAPITALIZED The Company capitalizes interest on borrowed funds related
to oil and gas expenditures that are not subject to amortization until
completion of evaluation or development activities.
INCOME TAXES The Company files a U.S. consolidated federal income tax return.
Deferred federal and state income taxes are provided on all significant
temporary differences, except for those essentially permanent in duration,
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.
CASH EQUIVALENTS The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash equivalents.
ACCOUNTS PAYABLE, BANKS This account represents credit balances to the extent
that checks issued have not been presented to the Company's banks for payment.
STOCK-BASED COMPENSATION The Company accounts for stock-based compensation
under the intrinsic value method. Under this method, the Company records no
compensation expense for stock options granted when the exercise price of
options granted is equal to the fair market value of Anadarko's common stock on
the date of grant. See Note 7.
EARNINGS PER SHARE Effective December 31, 1997, Anadarko adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." In
accordance with SFAS No. 128, the Company's basic earnings per share amounts
have been computed based on the average number of common shares outstanding.
Diluted earnings per share amounts include the effect of the Company's
outstanding stock options under the treasury stock method. In accordance with
SFAS No. 128, earnings per share and weighted-average shares outstanding have
been restated to conform to this statement for all periods presented. See Note
7.
42
<PAGE> 44
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
2. DISPOSITION OF FOREIGN SUBSIDIARY
In September 1996, Anadarko sold its wholly-owned subsidiary, Anadarko
Indonesia Company, Jabung. As a result, the Company recorded a gain of
$19,385,000 and U.S. income tax expense of $7,040,000 on the sale.
3. CASH AND CASH EQUIVALENTS
As of December 31, 1997 and 1996, cash and cash equivalents included
$270,000 and $321,000, respectively, held by the Anadarko Petroleum Corporation
Executives and Directors Benefits Trust. See Note 7.
4. INVENTORIES
Inventories are stated at the lower of average cost or market. Natural gas
and NGLs, when sold from inventory, are charged to expense using the
average-cost method. The major classes of inventories are as follows:
<TABLE>
<CAPTION>
1997 1996
thousands ------- -------
<S> <C> <C>
Materials and supplies $27,332 $23,495
Natural gas, stored in inventory 1,232 1,017
Natural gas liquids, stored in inventory -- 28
------- -------
$28,564 $24,540
------- -------
</TABLE>
5. PROPERTIES AND EQUIPMENT
A summary of the original cost of properties and equipment by
classification follows:
<TABLE>
<CAPTION>
1997 1996
thousands ---------- ----------
<S> <C> <C>
Oil and gas properties $4,378,545 $3,750,797
Gathering facilities 132,608 132,631
Plant facilities 13,286 17,726
General properties 144,812 135,011
---------- ----------
$4,669,251 $4,036,165
---------- ----------
</TABLE>
Oil and gas properties are amortized using the unit-of-production method.
All other properties are depreciated on the straight-line basis over the useful
lives of the assets, which range from three to 25 years.
Oil and gas properties include costs of $343,789,000 and $254,811,000 at
December 31, 1997 and 1996, respectively, which were excluded from capitalized
costs being amortized. These amounts represent costs associated with unevaluated
properties and major development projects. Anadarko excludes all costs on a
country-by-country basis until proved reserves are found or until it is
determined that the costs are impaired. All excluded costs are reviewed
quarterly to determine if impairment has occurred.
Properties and equipment includes costs of $404,942,000 and $231,858,000 at
December 31, 1997 and 1996, respectively, for the Company's exploration and
development activities in Algeria. Depreciation of these assets will begin when
production commences.
During 1996 and 1995, the Company made provisions for impairments of
international properties of $5,400,000 and $600,000, respectively, which were
related to oil and gas properties. These impairments related to projects that
the Company has decided not to pursue in China and various other international
locations. During 1995, the Company made a provision for impairment of
geothermal properties of $2,000,000.
43
<PAGE> 45
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
5. PROPERTIES AND EQUIPMENT -- (CONTINUED)
Total interest costs incurred during 1997, 1996 and 1995 were $62,096,000,
$55,985,000 and $52,557,000, respectively. Of these amounts, the Company
capitalized $21,137,000, $17,012,000 and $16,199,000 during 1997, 1996 and 1995,
respectively. Capitalized interest is included as part of the cost of oil and
gas properties. The capitalization rates are based on the Company's weighted
average cost of borrowings used to finance the expenditures.
In addition to capitalized interest, the Company also capitalized internal
costs of $66,899,000, $50,213,000 and $40,617,000 during 1997, 1996 and 1995,
respectively. These internal costs were directly related to acquisition,
exploration and development activities and are included as part of the cost of
oil and gas properties.
6. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
PRINCIPAL
----------------------
1997 1996
thousands -------- --------
<S> <C> <C>
Commercial Paper* $125,733 $ 31,049
Notes Payable, Banks* 30,000 --
8 3/4% Notes due 1998 100,000 100,000
8 1/4% Notes due 2001 100,000 100,000
6 3/4% Notes due 2003 100,000 100,000
5 7/8% Notes due 2003 100,000 100,000
7 1/4% Debentures due 2025 100,000 100,000
7% Debentures due 2027 100,000 --
7.73% Debentures due 2096 100,000 100,000
7 1/4% Debentures due 2096 100,000 100,000
-------- --------
$955,733 $731,049
-------- --------
</TABLE>
- ---------------
* The average rates in effect at December 31, 1997 and 1996 were 6.04% and
6.30%, respectively, for the Commercial Paper. The average rate in effect at
December 31, 1997 was 5.95% for the Notes Payable, Banks.
Anadarko has noncommitted lines of credit from several banks. The general
provisions of these lines of credit provide for Anadarko to borrow funds for
terms and rates offered from time to time by the banks. There are no fees
associated with these lines of credit.
The Company has a commercial paper program that allows Anadarko to borrow
funds, at rates as offered, by issuing notes to investors for terms of up to 270
days.
The commercial paper, notes payable to banks and 8 3/4% Notes due 1998 have
been classified as long-term debt in accordance with SFAS No. 6, "Classification
of Short-term Obligations Expected to be Refinanced," under the terms of
Anadarko's Bank Credit Agreements.
In November 1997, Anadarko issued $100,000,000 principal amount of 7%
Debentures due 2027. Net proceeds from the offering were used to repay floating
interest rate debt.
In July 1997, Anadarko filed a shelf registration statement with the
Securities and Exchange Commission that permits the issuance of up to
$300,000,000 in senior and subordinated debt securities and equity securities.
Net proceeds, terms and pricing of offerings of securities issued under the
shelf registration statement will be determined at the time of the offering.
Anadarko has used similar shelf registration statements since 1989 to provide
added flexibility in financing strategies. As of December 31, 1997, $100,000,000
principal amount of securities had been issued under this shelf registration.
44
<PAGE> 46
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS -- (CONTINUED)
In January 1997, the Company entered into a sale-leaseback agreement for
$88,300,000 (net) involving 145 natural gas compressors in Anadarko's major
mid-continent gathering systems. Proceeds from this transaction were used for
general corporate purposes. The gain of $66,600,000 is deferred and will be
amortized over the lease term as a reduction to operating expense. As of
December 31, 1997, Deferred Credits -- Other includes $57,800,000 related to the
long-term portion of the deferred gain.
In November 1996, Anadarko issued $100,000,000 principal amount of 7 1/4%
Debentures due 2096. The Company has a conditional right to shorten the maturity
of the Debentures if tax law changes impact the tax deduction for interest on
the Debentures. Net proceeds from the offering were used to repay floating
interest rate debt.
In September 1996, Anadarko issued $100,000,000 principal amount of 7.73%
Debentures due 2096. Each Debenture holder has the one-time right to have the
Company purchase on September 15, 2026, all or a portion of, the Debentures at a
purchase price equal to par plus accrued and unpaid interest. Net proceeds from
the offering were used to repay floating interest rate debt.
In March 1995, Anadarko issued $100,000,000 principal amount of 7 1/4%
Debentures due 2025. Each Debenture holder has the one-time right to have the
Company purchase on March 15, 2000, all or a portion of, the Debentures at a
purchase price equal to par plus accrued and unpaid interest. Net proceeds from
the offering were used to repay floating interest rate debt.
In May 1994, the Company entered into a $250,000,000 Revolving Credit
Agreement and a $150,000,000 364-Day Credit Agreement with a group of 11
commercial banks. In June 1997, the Agreements were amended as follows: the
principal amounts of the Agreements were reduced from $250,000,000 and
$150,000,000, respectively, to $225,000,000 and $125,000,000, respectively; the
number of commercial banks in the group was changed from eleven to eight; and,
the expiration dates of the Agreements were extended for one year. Interest
rates are based on either the reference rate, the rate of certificate of
deposit, the Eurodollar rate or a combination thereof. The Agreements provide
for commitment fees on the unused balances at a rate of 8.5/100 of one percent
and 6.5/100 of one percent for the Revolving Credit Agreement and 364-Day Credit
Agreement, respectively. The Revolving Credit Agreement will expire in 2002.
During 1997 and 1996, there were no outstanding borrowings under these
Agreements.
During 1997 and 1996, the Company had available $20,000,000 in a bank line
of credit which was not used. The maximum interest rate for loans against the
line was the reference rate of the bank. The line of credit is renewable
annually, but may be withdrawn at any time by the bank. In 1997 and 1996,
Anadarko maintained an average daily compensating balance of $1,000,000 for this
line of credit.
Total sinking fund and installment payments related to long-term debt for
the five years ending December 31, 2002 are shown below. The payments related to
the redemption of the commercial paper, notes payable to banks, and the 8 3/4%
Notes due 1998 are included in the amounts shown in a manner consistent with the
terms for repayment of the Revolving Credit Agreement or the 364-Day Credit
Agreement.
<TABLE>
<CAPTION>
thousands
<S> <C>
1998 $ --
1999 --
2000* 130,733
2001 100,000
2002 225,000
</TABLE>
- ---------------
* Includes the 7 1/4% Debentures due 2025 which are shown because of the
Debenture holders' one-time redemption rights in 2000.
45
<PAGE> 47
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS -- (CONTINUED)
The following information discloses the fair value of the Company's
financial instruments:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
THOUSANDS --------------- ----------
<S> <C> <C>
1997
Cash and cash equivalents $ 8,907 $ 8,907
Long-term debt 955,733 993,858
Commodity derivative financial instruments
Asset 3,664 3,664
Liability (741) (741)
1996
Cash and cash equivalents $ 14,601 $ 14,601
Long-term debt 731,049 735,799
Commodity derivative financial instruments
Asset 5,121 5,121
Liability (7,515) (7,515)
</TABLE>
CASH AND CASH EQUIVALENTS The carrying amount reported on the balance sheet
approximates fair value.
LONG-TERM DEBT The fair value of long-term debt at December 31, 1997 and 1996
is the value the Company would have to pay to retire the debt, including any
premium or discount to the debt holder for the differential between stated
interest rate and year-end market rate. The fair values are based on quoted
market prices from Standard & Poor's Bond Guide and, where such quotes were not
available, on the average rate in effect at year-end.
COMMODITY DERIVATIVE FINANCIAL INSTRUMENTS Anadarko uses commodity derivative
financial instruments -- futures, swaps and options -- to fix a price
independent of the timing of the physical purchase or sale, to fix a price
differential (basis) between the price of gas at Henry Hub and the price at the
market locations at which Anadarko purchases and sells oil and gas (market
locations), to hedge the fixed price or fixed basis pricing requirements of
Anadarko's customers and suppliers, and to hedge the value of gas in storage or
gas owed to or due from pipelines. The fair value of derivative financial
instruments reflects the estimated amounts that the Company would receive or pay
to settle the contracts as of December 31. Dealer quotes are available for the
majority of the Company's derivatives.
COMMODITY FUTURES Anadarko generally uses commodity futures contracts to fix
the price of gas delivered to Henry Hub or oil delivered to Cushing. Futures
contracts have settlement guaranteed by the New York Mercantile Exchange (NYMEX)
and have nominal credit risk.
At year-end 1997, Anadarko had open natural gas futures contracts related
to customer and supplier pricing requirements totaling 30 billion British
thermal units per day (BBtu/d) related to sales for February through March 1998
and 20 BBtu/d for April through August 1998.
At year-end 1996, Anadarko had open natural gas futures contracts related
to sales totaling 76 BBtu/d related to sales for February through March 1997.
The Company had open natural gas futures contracts related to gas owed to
pipelines of 15 BBtu/d for April through May 1997. Anadarko had open crude oil
futures contracts related to sales of 6 thousand barrels per day (MBbls/d) for
February 1997.
COMMODITY SWAPS Anadarko generally uses commodity swap agreements with
third-parties to fix the price of gas and oil at its market locations. In
addition, Anadarko uses basis swap agreements to fix the price differential
between the price of gas at Henry Hub and the price of gas at its market
locations. These energy swap agreements expose the Company to third-party credit
risk to the extent the third-parties are unable to
46
<PAGE> 48
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS -- (CONTINUED)
meet their monthly settlement commitment to the Company. The Company monitors
the credit standing of the third-parties and anticipates they will be able to
fully satisfy their contractual obligations.
At year-end 1997, Anadarko had open basis swap agreements for the Company's
gas sales averaging 30 BBtu/d for 1998 and 1999 which were offset by open basis
swap agreements of like amounts for the same periods, thus eliminating the risk
to Anadarko from future price changes related to this position. Anadarko had
open gas swap agreements for the Company's gas sales averaging 58 BBtu/d for
February through March 1998, 8 BBtu/d for April through October 1998, and 20
BBtu/d for January 1999. The Company also had open gas swap agreements related
to customer and supplier gas pricing requirements of 56 BBtu/d for February
through March 1998, 15 BBtu/d for April through December 1998, and 28 BBtu/d for
January through March 1999.
At year-end 1996, the Company had open gas basis swap agreements related to
sales averaging 270 BBtu/d for February through March 1997 and 70 BBtu/d for
April through July 1997. In addition, the Company had open gas swaps related to
customer and supplier gas pricing requirements of 8 BBtu/d for February through
March 1997 and related to gas owed to pipelines of 15 BBtu/d for April through
May 1997.
COMMODITY OPTIONS The Company generally uses commodity options to fix a floor
and a ceiling for prices (a "collar") on its sales volumes. The Company also has
used options to "straddle" a price, effectively setting a price above the then
present market price at which the Company is willing to fix its sales price and
a price below the then present market price at which the Company is willing to
fix its purchase price for third party supply. Like futures, NYMEX options have
settlement guaranteed and have nominal credit risk.
At year-end 1997, Anadarko had open NYMEX options for the Company's gas
sales of 1.5 BBtu/d for both puts and calls during April through November 1998
in order to fix a price range on gas sales. Anadarko had open NYMEX gas options
for its customers of 10 BBtu/d for puts and 25 BBtu/d for calls for February
through March 1998 and 5 BBtu/d for calls for April through July 1998. In
addition, the Company had open crude oil options of 1.7 MBbls/d for both puts
and calls during February through March 1998.
At year-end 1996, Anadarko had open NYMEX options for the Company's gas
sales of 10 BBtu/d for puts and 16 BBtu/d for calls during February and March
1997 and 30 BBtu/d for both puts and calls during April through July 1997.
Anadarko also had open NYMEX gas options for its customers of 30 BBtu/d for puts
and 6 BBtu/d for calls for February through March 1997. In addition, the Company
had open crude oil options of 5.1 MBbls/d for both puts and calls during
February through April 1997.
INTEREST RATE SWAP During 1996, Anadarko entered into a 10-year swap agreement
with a notional value of $100,000,000 whereby the Company receives a fixed
interest rate and pays a floating interest rate indexed to 3-month LIBOR. This
agreement was entered into to offset a portion of the effect of the Company's
fixed rate long-term debt financed in 1996.
47
<PAGE> 49
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
7. STOCK AND STOCK OPTIONS
Following is a schedule of the changes in the Company's shares of common
stock:
<TABLE>
<CAPTION>
1997 1996 1995
thousands ------ ------ ------
<S> <C> <C> <C>
SHARES OF COMMON STOCK ISSUED
Beginning of year 60,526 60,016 58,857
Exercise of stock options 149 413 58
Issuance of restricted stock 148 39 27
Issuance of shares for employee savings plan 63 58 74
Issuance of shares for Executives and Directors Benefits
Trust -- -- 1,000
------ ------ ------
End of year 60,886 60,526 60,016
------ ------ ------
SHARES OF COMMON STOCK HELD IN TREASURY
Beginning of year -- -- --
Issuance of shares for employee savings plan (13) (12) (9)
Purchase of treasury stock 13 12 10
Sale of treasury stock -- -- (1)
------ ------ ------
End of year -- -- --
------ ------ ------
SHARES OF COMMON STOCK HELD FOR EXECUTIVES AND DIRECTORS
BENEFITS TRUST
Beginning of year 1,000 1,000 --
Purchase of shares -- -- 1,000
------ ------ ------
End of year 1,000 1,000 1,000
------ ------ ------
SHARES OF COMMON STOCK OUTSTANDING AT END OF YEAR 59,886 59,526 59,016
------ ------ ------
</TABLE>
In each quarter of 1997, 1996 and 1995, dividends of 7.5 cents per share
were paid to holders of common stock. Under the most restrictive provisions of
the various credit agreements, which limit the payment of dividends by the
Company, retained earnings of $466,780,000, $364,080,000 and $259,694,000 were
not restricted as to the payment of dividends at December 31, 1997, 1996 and
1995, respectively.
During 1997, 1996 and 1995, the Company acquired treasury stock only as a
result of stock option exercises, restricted stock transactions or buyback of
shares, which were unsolicited from stockholders.
In May 1995, the Company issued 1,000,000 shares of common stock to the
Anadarko Petroleum Corporation Executives and Directors Benefits Trust (Trust)
to secure present and future unfunded benefit obligations of the Company. These
benefit obligations are provided for under pension plans and deferred
compensation plans for certain employees and non-employee directors of the
Company. The obligations included in Deferred Credits -- Other are $16,288,000
and $13,786,000 as of December 31, 1997 and 1996, respectively. The shares
issued to the Trust are not considered outstanding for quorum or voting
calculations, but the Trust receives dividends. Under the treasury stock method,
the shares are not included in the calculation of earnings per share. The fair
market value of these shares is included in common stock and paid-in capital and
as a reduction to stockholders' equity. As of December 31, 1997 and 1996, there
were 1,000,000 shares of Anadarko common stock in the Trust. See Note 14.
Key employees may be granted options to purchase shares of Anadarko common
stock and other stock related awards under the 1993 Stock Incentive Plan. Stock
options are granted at the fair market value of Anadarko stock on the date of
grant and have a maximum term of eleven years from the date of grant.
In addition, the 1993 Stock Incentive Plan provides that up to 800,000
shares of common stock may be granted as restricted stock. Generally, restricted
stock is subject to forfeiture restrictions and cannot be sold, transferred or
disposed of during the restriction period. The holders of the restricted stock
have all the rights of a stockholder of the Company with respect to such shares,
including the right to vote and receive dividends or
48
<PAGE> 50
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
7. STOCK AND STOCK OPTIONS -- (CONTINUED)
other distributions paid with respect to such shares. During 1997, 1996 and
1995, the Company issued 148,000, 39,450 and 26,950 shares, respectively, of
restricted stock with a weighted-average grant date fair value of $68.12, $63.42
and $41.04, respectively.
Non-employee Directors are automatically granted non-qualified stock
options under the 1988 Stock Option Plan for Non-employee Directors. This plan
will terminate in October 1998. Stock options are granted at the fair market
value of Anadarko stock on the date of grant and have a maximum term of ten
years from the date of grant. The options vest one year from the date of grant.
The 1987 Stock Option Plan terminated pursuant to its terms in 1997. Some
of the option grants made prior to the termination are still outstanding.
Outstanding grants will terminate ten years from the date of grant unless
exercised earlier.
In 1996, Anadarko and a key officer of the Company entered into a
Performance Share Agreement under the 1993 Stock Incentive Plan. The Agreement
provides for issuance of up to 150,000 shares of common stock of the Company at
the end of a four or eight-year period contingent upon the Company's achievement
of predetermined objectives. During each of the years ended December 31, 1997
and 1996, annual expense of $2,000,000 was recognized under the Agreement. The
fair value of the performance shares is not determinable at this time since the
shares to be issued are contingent upon the Company's achievement of the
objectives.
Unexercised stock options are included in the diluted earnings per common
share using the treasury stock method. Information regarding the Company's stock
option plans is summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
SHARES Price Shares Price Shares Price
OPTIONS IN THOUSANDS ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
SHARES UNDER OPTION AT BEGINNING
OF YEAR 2,872 $46.08 2,403 $38.13 2,010 $37.13
Granted 662 $75.80 933 $58.84 491 $41.41
Exercised (150) $34.48 (456) $30.36 (84) $31.69
Surrendered or expired (6) $57.57 (8) $44.62 (14) $47.36
----- ----- -----
SHARES UNDER OPTION AT END OF
YEAR 3,378 $52.40 2,872 $46.08 2,403 $38.13
----- ----- -----
Options exercisable at December
31 2,146 $43.71 1,772 $40.18 1,731 $36.12
----- ----- -----
Shares available for future
grant at end of year 1,414 2,222 3,186
----- ----- -----
Weighted-average fair value of
options granted during the
year $26.75 $23.92 $15.36
</TABLE>
49
<PAGE> 51
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
7. STOCK AND STOCK OPTIONS -- (CONTINUED)
The following table summarizes information about the Company's stock
options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -----------------------
WEIGHTED-
AVERAGE
REMAINING WEIGHTED- WEIGHTED-
RANGE OF OPTIONS CONTRACTUAL AVERAGE OPTIONS AVERAGE
EXERCISE OUTSTANDING LIFE EXERCISE EXERCISABLE EXERCISE
PRICES AT YEAR END (YEARS) PRICE AT YEAR END PRICE
-------- ----------- ----------- --------- ----------- ---------
options in thousands
<S> <C> <C> <C> <C> <C>
$26.06 - $47.00 1,414 5.25 $38.33 1,414 $38.33
$47.69 - $54.38 856 8.13 $51.57 496 $49.54
$63.63 - $72.63 477 8.89 $64.20 236 $63.65
$75.94 - $75.94 631 9.84 $75.94 -- $ --
----- ---- ------ ----- ------
Total 3,378 7.17 $49.41 2,146 $43.71
----- ---- ------ ----- ------
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C> <C>
Expected option life - years 5.11 6.35 5.65
Risk-free interest rate 6.18% 6.13% 5.94%
Dividend yield 0.60% 0.70% 0.82%
Volatility 28.76% 31.47% 30.59%
</TABLE>
SFAS No. 123 "Accounting for Stock-based Compensation" defines a fair value
method of accounting for an employee stock option or similar equity instrument.
SFAS No. 123 allows an entity to continue to measure compensation costs for
these plans using the current method of accounting. Anadarko has elected to
continue the current method of accounting for employee stock compensation plans,
which is based upon Accounting Principles Board Opinion No. 25 and related
interpretations. Accordingly, no compensation expense is recognized for stock
options granted with an exercise price equal to the market value of Anadarko
stock on the date of grant. If compensation expense for the Company's stock
option plans had been determined using the fair-value method in SFAS No. 123,
the Company's net income and earnings per share would have been as shown in the
pro forma amounts below:
<TABLE>
<CAPTION>
1997 1996 1995
thousands except per share amounts -------- -------- -------
<S> <C> <C> <C> <C>
Net income As reported $107,318 $100,720 $21,035
Pro forma $ 99,928 $ 96,099 $20,577
Basic earnings per share As reported $ 1.80 $ 1.70 $ 0.36
Pro forma $ 1.67 $ 1.62 $ 0.35
Diluted earnings per share As reported $ 1.78 $ 1.69 $ 0.36
Pro forma $ 1.66 $ 1.61 $ 0.35
</TABLE>
50
<PAGE> 52
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
7. STOCK AND STOCK OPTIONS -- (CONTINUED)
The following table illustrates the reconciliation of the numerators and
denominators of the basic and diluted earnings per common share computations for
income related to the unexercised stock options outstanding at year-end.
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended For the Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
----------------------------- ----------------------------- ----------------------------
Per Share Per Share Per Share
INCOME SHARES Amount Income Shares Amount Income Shares Amount
thousands except per share amounts -------- ------ --------- -------- ------ --------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available to common
stockholders $107,318 59,717 $1.80 $100,720 59,247 $1.70 $21,035 58,935 $0.36
----- ----- -----
Stock options -- 410 -- 348 -- 196
-------- ------ -------- ------ ------- ------
DILUTED EARNINGS PER SHARE
Income available to common
stockholders and assumed
conversion $107,318 60,127 $1.78 $100,720 59,595 $1.69 $21,035 59,131 $0.36
-------- ------ ----- -------- ------ ----- ------- ------ -----
</TABLE>
8. STATEMENT OF CASH FLOWS SUPPLEMENTAL INFORMATION
The amounts of cash paid (received) for interest (net of amounts
capitalized) and income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
thousands ------- ------- -------
<S> <C> <C> <C>
Interest $39,617 $36,197 $32,801
Income taxes paid (received) $12,068 $ 8,484 $(3,803)
</TABLE>
9. TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS
During 1989, Anadarko Algeria entered into a Production Sharing Agreement
(PSA) with SONATRACH, the national oil and gas enterprise of Algeria. SONATRACH
is the beneficial owner of 10.1 percent of the Company's outstanding common
stock. The PSA gives Anadarko Algeria the right to explore for and produce
liquid hydrocarbons in Algeria, subject to the sharing of production with
SONATRACH. Anadarko Algeria has two partners in the PSA. During 1994, the
Company acquired a minority interest in a PSA covering two additional blocks in
the same region, which are operated by BHP Petroleum (Algerie) Inc., where an
exploration program is already underway. Approximately $438,000, $60,000 and
$432,000 was paid to SONATRACH in 1997, 1996 and 1995, respectively, for charges
related to reservoir studies, laboratory services, well testing services and
equipment usage. During 1997, $7,911,000 was received and $7,129,000 was
included in accounts receivable as of December 31, 1997 from SONATRACH for joint
interest billings of development costs in Algeria under the PSA. The amounts
received from SONATRACH are paid in Algerian dinars, the local currency, which
are used by the Company to make payments in Algeria. As of December 31, 1997,
Anadarko Algeria's total net investment in Algeria for exploration, development
and related activities was $404,942,000, of which approximately $173,084,000 was
incurred in 1997.
In 1996, Anadarko and partners signed a $177-million Engineering,
Procurement and Construction (EPC) contract with Brown & Root Condor, a company
jointly owned by Brown & Root and affiliates of SONATRACH. For the years ended
December 31, 1997 and 1996, approximately $107,049,000 and $21,933,000,
respectively, was paid to Brown & Root Condor under the EPC contract.
Political unrest continues in Algeria. Anadarko is closely monitoring the
situation and has taken reasonable and prudent steps to ensure the safety of
employees working and the security of its facilities in the remote regions of
the Sahara Desert. Anadarko is presently unable to predict with certainty any
effect the current situation may have on activity planned for 1998 and beyond.
However, the situation has not had any
51
<PAGE> 53
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
9. TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS -- (CONTINUED)
material effect on the Company's operations. The Company's activities in Algeria
also are subject to the general risks associated with all foreign operations.
In 1997 and 1996, the Company paid $800,000 and $878,000, respectively, to
Petroleum Information/ Dwights LLC and its subsidiaries for production, drilling
and seismic data. Also in 1997 and 1996, the Company paid Houston Advanced
Research Center (HARC) $20,000 and $50,000, respectively, for seismic imaging
projects. John R. Butler, Jr., a director of the Company, serves as Senior
Chairman for Petroleum Information/Dwights LLC and Chairman of HARC.
The Company's natural gas is sold to interstate and intrastate gas
pipelines, direct end-users, industrial users, local distribution companies and
gas marketers. Crude oil and condensate are sold to marketers, gatherers and
refiners. NGLs are sold to direct end-users, refiners and marketers. These
purchasers are located in the United States, Canada and Mexico. The majority of
the Company's receivables are paid within two months following the month of
purchase.
The Company generally performs a credit analysis of customers prior to
making any sales to new customers. Based upon this credit analysis, the Company
may require a standby letter of credit or a financial guarantee.
In 1997, sales to CoEnergy Trading Co. were $200,368,000, sales to Texaco
Trading & Transportation Company were $78,816,000 and sales to Proliance Energy
LLC were $75,808,000, each of which accounted for more than ten percent of the
Company's total 1997 revenues. In 1996, sales to Texaco Trading & Transportation
Company were $64,444,000, which accounted for more than ten percent of the
Company's total 1996 revenues. In 1995, sales to Indiana Gas Company
Incorporated were $53,130,000 and sales to Texaco Trading & Transportation
Company were $53,092,000, each of which accounted for more than ten percent of
the Company's total 1995 revenues.
10. OPERATING EXPENSES
Operating expenses by category are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
thousands -------- -------- --------
<S> <C> <C> <C>
Oil and gas $ 81,018 $ 65,896 $ 68,506
Plant and gathering 56,703 34,231 26,119
Gas purchases 14,119 13,073 10,123
Other 2,817 2,108 1,081
-------- -------- --------
Total $154,657 $115,308 $105,829
-------- -------- --------
</TABLE>
11. OTHER TAXES
Significant taxes other than income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
thousands -------- -------- --------
<S> <C> <C> <C>
Production and severance $ 22,092 $ 19,457 $ 16,898
Ad valorem 17,035 14,137 16,624
Payroll and other 3,647 3,611 3,370
-------- -------- --------
Total $ 42,774 $ 37,205 $ 36,892
-------- -------- --------
</TABLE>
52
<PAGE> 54
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
12. INCOME TAXES
Income tax expense, including deferred amounts, is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
thousands -------- -------- -------
<S> <C> <C> <C>
CURRENT
Federal $ 6,964 $ 2,849 $(3,385)
State 1,801 (10) 72
-------- -------- -------
Total 8,765 2,839 (3,313)
-------- -------- -------
DEFERRED
Federal 46,816 51,075 11,056
State 1,460 3,156 488
-------- -------- -------
Total 48,276 54,231 11,544
-------- -------- -------
Total income taxes $ 57,041 $ 57,070 $ 8,231
-------- -------- -------
</TABLE>
Total income taxes were different than the amounts computed by applying the
statutory income tax rate to Income before Income Taxes. The sources of these
differences are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
thousands -------- -------- -------
<S> <C> <C> <C>
Income before Income Taxes
Domestic $179,754 $172,483 $36,663
Foreign (15,395) (14,693) (7,397)
-------- -------- -------
Total $164,359 $157,790 $29,266
-------- -------- -------
Statutory tax rate 35% 35% 35%
Tax computed at statutory rate $ 57,526 $ 55,227 $10,243
Adjustments resulting from:
State income taxes (net of federal income tax benefit) 2,120 2,045 364
Oil and gas credits (1,743) (367) (1,865)
Life insurance policies (908) (238) (566)
Other -- net 46 403 55
-------- -------- -------
Total income taxes $ 57,041 $ 57,070 $ 8,231
-------- -------- -------
Effective tax rate 35% 36% 28%
-------- -------- -------
</TABLE>
The tax benefit of compensation expense for tax purposes in excess of
amounts recognized for financial accounting purposes has been credited directly
to stockholders' equity. For 1997, 1996 and 1995 the tax benefit amounted to
$1,864,000, $5,055,000 and $458,000, respectively.
53
<PAGE> 55
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
12. INCOME TAXES -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities (assets) at December 31, 1997 and 1996
are as follows:
<TABLE>
<CAPTION>
1997 1996
thousands -------- --------
<S> <C> <C>
Oil and gas exploration and development costs $609,793 $538,367
Other 18,643 21,567
-------- --------
Gross deferred tax liabilities 628,436 559,934
-------- --------
Alternative minimum tax credit carryforward (28,501) (29,403)
Other (53,143) (31,558)
-------- --------
Gross deferred tax assets (81,644) (60,961)
-------- --------
Net deferred tax liabilities $546,792 $498,973
-------- --------
</TABLE>
The Company has determined that it is more likely than not that the
deferred tax assets will be realized and a valuation allowance for such assets
is not required.
An alternative minimum tax credit carryforward of $28,501,000 at December
31, 1997 is available for future utilization on federal income tax returns. This
tax credit carryforward does not expire.
13. LEASE COMMITMENTS
The Company has various commitments under non-cancelable operating lease
agreements for buildings, facilities and equipment, the majority of which expire
at various dates through 2014. The leases are expected to be renewed or replaced
as they expire. At December 31, 1997, future minimum rental payments due under
operating leases are as follows:
<TABLE>
<CAPTION>
thousands
<S> <C>
1998 $ 25,220
1999 22,538
2000 19,735
2001 17,668
2002 12,497
Later years 103,474
--------
Total minimum lease payments $201,132
--------
</TABLE>
Total rental expense amounted to $24,797,000, $12,702,000 and $9,858,000 in
1997, 1996 and 1995, respectively.
54
<PAGE> 56
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
14. PENSION PLANS, EMPLOYEE SAVINGS PLAN AND OTHER POSTRETIREMENT BENEFITS
PENSION PLANS The Company has a non-contributory defined benefit pension plan
covering all permanent U.S. resident employees, except certain employees in
foreign countries. The benefits for this plan are based primarily on years of
service and pay near retirement. Plan assets consist principally of fixed income
investments and equity securities. The Company funds the plan with annual
contributions as determined in accordance with the Employee Retirement Income
Security Act of 1974 and Internal Revenue Code of 1986, as amended, limitations.
The Company has an equalization plan to ensure payments to certain
employees of amounts to which they are already entitled under the provisions of
the pension plan, but which are subject to limitations imposed by federal tax
laws. This plan is unfunded and payable solely from the general assets of the
Company. In addition, the Company had a pension plan for non-employee directors,
which was unfunded. The Plan was terminated effective January 1, 1998. In
January 1998, the Board of Directors approved the 1998 Director Stock Plan,
subject to stockholder approval. This Plan enables the directors to acquire an
interest in the Company. The Company's benefit obligations under the unfunded
pension plans are secured by the Anadarko Petroleum Corporation Executives and
Directors Benefits Trust. See Note 7.
The 1997, 1996 and 1995 pension cost related to these plans includes the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
thousands -------- ------- -------
<S> <C> <C> <C>
Service costs - benefits earned in the period $ 4,551 $ 4,484 $ 3,415
Interest cost on projected benefit obligation 4,562 3,945 2,991
Actual return on plan assets (11,131) (5,603) (9,227)
Amortization values and deferrals 7,741 2,481 6,165
-------- ------- -------
Pension cost $ 5,723 $ 5,307 $ 3,344
-------- ------- -------
</TABLE>
The Company had an additional minimum liability of $2,601,000 and
$2,359,000 at December 31, 1997 and 1996, respectively, which represents the
difference between the unfunded accumulated benefit obligation and the accrued
pension cost related to the equalization plan. This liability was offset by an
intangible asset of an equal amount.
55
<PAGE> 57
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
14. PENSION PLANS, EMPLOYEE SAVINGS PLAN AND OTHER POSTRETIREMENT
BENEFITS -- (CONTINUED)
The funded status of the plans at December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS
(FUNDED) (UNFUNDED)
thousands ------------- ---------------
<S> <C> <C>
1997
Actuarial present value of:
Vested benefit obligation $39,599 $ 7,586
Accumulated benefit obligation 48,230 8,618
Projected benefit obligation $63,880 $ 11,472
Plan assets at market value $60,894 $ --
Projected benefit obligation in excess of plan assets $(2,986) $(11,472)
Unrecognized initial asset (4,143) --
Unrecognized (gain) loss (3,481) 4,558
Unrecognized prior service cost 833 829
Adjustment required to recognize additional minimum
liability -- (2,601)
------- --------
Accrued pension cost $(9,777) $ (8,686)
------- --------
1996
Actuarial present value of:
Vested benefit obligation $32,901 $ 5,900
Accumulated benefit obligation 39,471 6,565
Projected benefit obligation $52,318 $ 9,144
Plan assets at market value $50,844 $ --
Projected benefit obligation in excess of plan assets $(1,474) $ (9,144)
Unrecognized initial asset (4,670) --
Unrecognized (gain) loss (778) 3,721
Unrecognized prior service cost 1,150 1,043
Adjustment required to recognize additional minimum
liability -- (2,359)
------- --------
Accrued pension cost $(5,772) $ (6,739)
------- --------
</TABLE>
The Company's assumptions used as of December 31 in determining the pension
liability were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
percent ---- ---- ----
<S> <C> <C> <C>
Discount rate 7.25 7.5 7.25
Rates of increase in compensation levels 5.0 5.0 5.0
Long-term rate of return on plan assets 8.0 8.0 8.0
</TABLE>
EMPLOYEE SAVINGS PLAN The Company has an employee savings plan (ESP) that is a
defined contribution plan. The Company matches a portion of employees'
contributions with shares of the Company's common stock. Participation in the
ESP is voluntary and all regular employees of the Company are eligible to
participate. The Company charged to expense plan contributions of $4,618,000,
$4,076,000 and $3,731,000 during 1997, 1996 and 1995, respectively.
56
<PAGE> 58
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
14. PENSION PLANS, EMPLOYEE SAVINGS PLAN AND OTHER POSTRETIREMENT
BENEFITS -- (CONTINUED)
OTHER POSTRETIREMENT BENEFITS In addition to providing pension benefits, the
Company provides certain health care and life insurance benefits for retired
employees. Substantially all of the Company's employees, including expatriate
employees in foreign countries, may become eligible for these benefits if they
reach retirement age while working for the Company. These benefits and similar
benefits for active employees are provided through contributory and
noncontributory benefit plans.
Health care benefits are funded by contributions from the Company and its
employees, with retiree contributions adjusted per the provisions of the
Company's health care plans. The Company's current policy is to fund the cost of
postretirement health care benefits on a pay-as-you-go basis. The Company's
retiree life insurance plan is noncontributory and is currently fully funded
through insurance premiums paid by the Company.
The following table sets forth the Company's postretirement benefits other
than pension combined liability as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
thousands -------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation for:
Retirees $ (7,357) $ (6,888)
Fully eligible active plan participants (4,777) (4,043)
Other active plan participants (15,163) (12,081)
-------- --------
Total (27,297) (23,012)
Plan assets at fair value -- --
-------- --------
Accumulated postretirement benefit obligation in excess of
plan assets (27,297) (23,012)
Unrecognized net gain (5,410) (7,430)
-------- --------
Accrued postretirement benefit cost $(32,707) $(30,442)
-------- --------
</TABLE>
The Company charges postretirement benefits other than pensions as accrued,
based on actuarial calculations for each plan. The net annual costs for
postretirement benefits other than pensions for 1997 and 1996 included the
following components:
<TABLE>
<CAPTION>
1997 1996
thousands ------ ------
<S> <C> <C>
Service cost - benefits attributed to service during the
period $1,516 $1,664
Interest cost on accumulated obligation 1,708 1,680
Recognized benefit gain (359) (134)
------ ------
Net postretirement benefit cost $2,865 $3,210
------ ------
</TABLE>
The Company's assumptions used as of December 31 in determining the
accumulated postretirement benefit obligation shown above were as follows:
<TABLE>
<CAPTION>
1997 1996
percent -------- --------
<S> <C> <C>
Discount rate 7.25 7.50
Rates of increase in compensation levels 5.0 5.0
Health care trend rate 13.0-5.0 13.0-5.0
</TABLE>
The health care trend rate for the health care plans starts at the maximum
rate for the current year and is gradually reduced to an ultimate rate for 2001
and later years. A change in the health care trend rate of one percent would
change the annual cost in 1997 by approximately $623,000 and would change the
accumulated postretirement benefit obligation in 1997 by approximately
$3,878,000.
57
<PAGE> 59
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
15. CONTINGENCIES
ENVIRONMENTAL On December 17, 1993, the Company received a notice from the
Department of Justice in the State of California indicating the Company may be a
potentially responsible party (PRP) for the study, cleanup and closure of the
waste facility owned by Geothermal, Inc. in Middletown, California (the GI
site). Anadarko's records indicate the disposal of a limited number of barrels
of drilling mud at the GI site in 1982. During the first quarter of 1994, the
Company, along with other PRPs, became a party to a Cost Sharing, Joint Defense
and Confidentiality Agreement, effective October 20, 1993. The Company believes
its share of costs in connection with the cleanup of the GI site will be
approximately $35,000 to $70,000 and will not have a material effect on its
financial position, cash flows or results of operations.
KANSAS AD VALOREM TAX The Natural Gas Policy Act of 1978 (NGPA) allowed a
"severance, production or similar" tax to be included as an add-on, over and
above the maximum lawful price for natural gas. Based on the Federal Energy
Regulatory Commission (FERC) ruling that the Kansas ad valorem tax was such a
tax, the Company collected the Kansas ad valorem tax in addition to the
otherwise maximum lawful price. FERC's ruling was appealed to the United States
Court of Appeals for the District of Columbia (D.C. Circuit), which held in June
1988 that FERC failed to provide a reasoned basis for its findings and remanded
the case to FERC for further consideration.
On December 1, 1993, FERC issued an order reversing its prior ruling, but
limiting the effect of its decision to Kansas ad valorem taxes for sales made on
or after June 28, 1988. FERC clarified the effective date of its decision by an
order dated May 19, 1994. The clarification provided that the June 28, 1988
effective date applies to tax bills rendered after that date, not sales made on
or after that date. Based on Anadarko's interpretation of FERC's orders,
$700,000 (pre-tax) was charged against income in 1994, in addition to $130,000
(pre-tax) charged against income in 1993. Numerous parties filed appeals of
FERC's action in the D.C. Circuit. Anadarko, together with other natural gas
producers, challenged FERC's orders on two grounds: (1) that the Kansas ad
valorem tax, properly understood, did qualify for reimbursement under the NGPA;
and (2) FERC's ruling should, in any event, have been applied prospectively.
Other parties separately challenged FERC's orders on the grounds that FERC's
ruling should have been applied retroactively to December 1, 1978, the date of
the enactment of the NGPA and producers should have been required to pay refunds
accordingly.
The D.C. Circuit issued its decision on August 2, 1996 which holds that
producers must make refunds of all Kansas ad valorem taxes collected with
respect to production since October 1983. Petitions for rehearing were denied
November 6, 1996. The Company, along with other producing companies,
subsequently filed a petition for writ of certiorari with the United States
Supreme Court seeking to limit the scope of the potential refunds to tax bills
rendered on or after June 28, 1988 (the effective date originally selected by
FERC). Williams Natural Gas Company filed a cross-petition for certiorari
seeking to impose refund liability back to December 1, 1978. Both petitions were
denied on May 12, 1997.
Anadarko estimates that the maximum amount of principal and interest at
issue which has not been paid to date and assuming that the October 1983
effective date remains in effect, is about $40,000,000 (pre-tax) as of December
31, 1997. The Company along with other producing companies, filed a petition for
adjustment with FERC on May 12, 1997. In so doing, the Company sought waiver of
all interest which might otherwise be due. The total interest at issue is about
$25,000,000 (pre-tax). On September 10, 1997, FERC denied the petition for
adjustment. On January 28, 1998, FERC denied rehearing, but granted first
sellers the right to escrow funds in dispute in a separate order (the "Order
Clarifying Procedures"). By order dated February 26, 1998, in response to
producers' requests and Anadarko's particular request based on the litigation
with PanEnergy referenced below, FERC granted first sellers the right to secure
a surety bond instead of placing cash in escrow. All interested parties will
have 30 days to seek rehearing of this order. Refunds currently are due to be
paid by first sellers, with disputed amounts escrowed by cash or secured by
surety bond, by March 9, 1998, although a request for a general extension of
time filed by other producers is pending.
58
<PAGE> 60
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
15. CONTINGENCIES -- (CONTINUED)
Several parties, including Anadarko, sought rehearing or clarification of
the Order Clarifying Procedures. In that rehearing request, the Company outlined
in detail its interpretation of the scope of the phrase "amounts in dispute" as
encompassing legal disputes. At least one adverse party has requested that FERC
not permit producers to escrow disputed amounts or that FERC change its order to
permit only so-called "computational" disputes, rather than legal disputes, to
be eligible for escrow.
On March 4, 1998, FERC granted rehearing of its Order Clarifying Procedures
solely for purposes of further consideration. FERC's March 4, 1998 Order
provided affected parties with no substantive guidance regarding the pending
requests for rehearing or clarification. The March 4 Order simply had the effect
of granting the FERC more time to consider the pleadings pending before it.
If FERC should change or clarify its policy regarding the availability or
scope of a first sellers' right to bond or escrow disputed amounts, either on
its own motion or in response to pending rehearing requests, or if FERC should
reject the Company's legal defenses, the Company could be required to pay all or
part of the amounts claimed by all pipelines (which might include PanEnergy)
pending further potential review by FERC or federal courts. However, a FERC
order issued February 26, 1998 involving refunds paid by another producer to
Northern Natural Gas Company indicates that, if a producer prevails in
subsequent legal challenges, it may recoup amounts paid directly from the
pipeline itself, even if the pipeline subsequently distributes refunds to the
pipeline's customers. It should be noted, however, that interested parties will
have 30 days to seek rehearing or clarification of this order.
The Company intends to comply fully with all lawful orders issued by FERC,
without waiver of any claim of right or any defense or the right to seek
judicial review or intercession.
FERC's September 10, 1997 and January 28, 1998 Orders permit affected first
sellers to file individual petitions for adjustment. The Company may pursue an
individual petition for adjustment and has reserved all rights to contest
specific Statement of Refunds submitted by pipeline purchasers. Offers of
settlement and demands for a hearing have been filed by producers, including
Anadarko, with the FERC regarding particular pipeline purchasers. The offer of
settlement filed by Anadarko with respect to PanEnergy is subject to the
litigation discussed below such that if a settlement amount is agreed to, the
litigation will determine whether PanEnergy or Anadarko issues the agreed to
refund. On March 3, 1998, FERC issued notice regarding those settlement offers
and requested comment by all interested persons.
On May 13, 1997, the Company filed a lawsuit in the Federal District Court
for the Southern District of Texas against PanEnergy seeking a declaration that
pursuant to prior agreements Anadarko is not required to issue refunds to
PanEnergy for the principal amount of $14,000,000 (pre-tax) and, if the petition
for adjustment discussed above is not granted in its entirety by FERC with
respect to PanEnergy refunds, interest in an amount of $24,000,000 (pre-tax) as
of December 31, 1997. The Company also seeks from PanEnergy the return of
$816,000 of the $830,000 (pre-tax) charged against income in 1993 and 1994. This
lawsuit currently has pending cross motions for summary judgment. In addition,
on February 18, 1998, PanEnergy filed a motion asserting that FERC has exclusive
jurisdiction over the matter and requesting the Court to dismiss or stay the
lawsuit. The Company filed appropriate responses disputing this contention.
Anadarko's net income for 1997 included a $1,800,000 charge (before income
taxes) related to the Kansas ad valorem tax refunds. This charge reflects all
principal and interest which may be due at the conclusion of all regulatory
proceedings and litigation to parties other than PanEnergy. The Company is
unable at this time to predict the final outcome of this matter and no provision
for liability (excluding the amounts recorded in 1993, 1994 and 1997) has been
made in the accompanying financial statements.
59
<PAGE> 61
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL QUARTERLY INFORMATION
(UNAUDITED)
QUARTERLY FINANCIAL DATA
The following table shows summary quarterly financial data for 1997 and
1996. See Management's Discussion and Analysis of Financial Condition and
Results of Operations under Item 7 of this Form 10-K.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
thousands except per share amounts ------- ------- ------- -------
<S> <C> <C> <C> <C>
1997
Operating revenues $170,506 $138,881 $158,323 $205,491
Operating income, pretax 62,364 29,650 37,736 73,629
Net income $ 34,434 $ 13,774 $ 17,092 $ 42,018
Earnings per common share - basic $ 0.58 $ 0.23 $ 0.29 $ 0.70
Earnings per common share - diluted $ 0.57 $ 0.23 $ 0.28 $ 0.70
1996
Operating revenues $135,707 $135,088 $128,551 $169,682
Operating income, pretax 40,897 37,127 49,401 68,220
Net income $ 20,516 $ 17,628 $ 24,949 $ 37,627
Earnings per common share - basic $ 0.35 $ 0.30 $ 0.42 $ 0.63
Earnings per common share - diluted $ 0.35 $ 0.30 $ 0.42 $ 0.63
</TABLE>
60
<PAGE> 62
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
OIL AND GAS PRODUCTION
The following is historical revenue and cost information relating to the
Company's oil and gas operations. Excluded from amounts subject to amortization
as of December 31, 1997 and 1996 are $343,789,000 and $254,811,000,
respectively, of costs associated with unevaluated properties and major
development projects. The majority of the evaluation activities are expected to
be completed within five years.
COSTS EXCLUDED FROM AMORTIZATION
<TABLE>
<CAPTION>
YEAR COSTS INCURRED EXCLUDED
-------------------------------------- COSTS AT
PRIOR DEC. 31,
YEARS 1995 1996 1997 1997
thousands ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Property acquisition $55,725 $ 4,093 $ 9,075 $ 13,507 $ 82,400
Exploration 36,888 20,231 52,307 111,279 220,705
Capitalized interest 6,718 8,108 10,064 15,794 40,684
------- ------- ------- -------- --------
Total $99,331 $32,432 $71,446 $140,580 $343,789
------- ------- ------- -------- --------
</TABLE>
CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
1997 1996
thousands ---------- ----------
<S> <C> <C>
UNITED STATES
Capitalized
Unproved properties $ 174,371 $ 157,296
Proved properties 3,753,890 3,353,650
Plant facilities 13,286 17,726
---------- ----------
3,941,547 3,528,672
Accumulated depreciation, depletion and amortization 1,812,560 1,649,344
---------- ----------
Net capitalized costs 2,128,987 1,879,328
---------- ----------
ALGERIA
Capitalized
Unproved properties 145,124 146,282
Proved properties 249,237 75,053
---------- ----------
Net capitalized costs 394,361 221,335
---------- ----------
OTHER OVERSEAS
Capitalized
Unproved properties 55,923 18,516
---------- ----------
Net capitalized costs 55,923 18,516
---------- ----------
TOTAL
Capitalized
Unproved properties 375,418 322,094
Proved properties 4,003,127 3,428,703
Plant facilities 13,286 17,726
---------- ----------
4,391,831 3,768,523
Accumulated depreciation, depletion and amortization 1,812,560 1,649,344
---------- ----------
Net capitalized costs $2,579,271 $2,119,179
---------- ----------
</TABLE>
61
<PAGE> 63
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
1997 1996 1995
thousands -------- -------- --------
<S> <C> <C> <C>
UNITED STATES -- Capitalized
Property acquisition
Exploration $ 22,292 $ 20,920 $ 9,723
Development 31,036 5,335 26,022
Exploration 111,959 106,602 76,056
Development 276,266 132,139 113,401
-------- -------- --------
441,553 264,996 225,202
-------- -------- --------
ALGERIA -- Capitalized
Property acquisition
Exploration 178 -- --
Exploration 83,860 49,343 38,940
Development 87,422 29,459 901
-------- -------- --------
171,460 78,802 39,841
-------- -------- --------
OTHER OVERSEAS -- Capitalized
Property acquisition
Exploration 2,085 -- 18
Development -- -- 6,848
Exploration 35,322 18,659 5,735
Development -- 470 --
-------- -------- --------
37,407 19,129 12,601
-------- -------- --------
TOTAL -- Capitalized
Property acquisition
Exploration 24,555 20,920 9,741
Development 31,036 5,335 32,870
Exploration 231,141 174,604 120,731
Development 363,688 162,068 114,302
-------- -------- --------
$650,420 $362,927 $277,644
-------- -------- --------
</TABLE>
62
<PAGE> 64
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
The following schedule includes only the revenues from the production and
sale of gas, oil, condensate and NGLs. Results of operations from oil and gas
marketing and gas gathering are excluded. The income tax expense is calculated
by applying the current statutory tax rates to the revenues after deducting
costs, which include depreciation, depletion and amortization (DD&A) allowances,
after giving effect to permanent differences. The results of operations exclude
general office overhead and interest expense attributable to oil and gas
production.
<TABLE>
<CAPTION>
1997 1996 1995
thousands -------- -------- --------
<S> <C> <C> <C>
UNITED STATES
Net revenues from production
Gas and oil sold to consolidated affiliates $379,982 $316,127 $221,341
Other sales of gas, oil, condensate and NGLs 274,308 229,398 191,902
-------- -------- --------
654,290 545,525 413,243
Production (lifting) costs 157,847 121,461 126,189
Depreciation, depletion and amortization* 181,163 149,488 153,648
-------- -------- --------
315,280 274,576 133,406
Income tax expense 111,711 98,368 46,041
-------- -------- --------
Results of operations $203,569 $176,208 $ 87,365
-------- -------- --------
*DD&A rate per net equivalent barrel $ 4.09 $ 3.96 $ 3.88
-------- -------- --------
</TABLE>
63
<PAGE> 65
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
OIL AND GAS RESERVES
The following table shows estimates prepared by the Company's engineers of
proved reserves and proved developed reserves, net of royalty interests, of
natural gas, crude oil, condensate and NGLs owned at year-end and changes in
proved reserves during the last three years. Volumes for natural gas are in
billions of cubic feet (Bcf) at a pressure base of 14.73 pounds per square inch
and volumes for oil, condensate and NGLs are in millions of barrels (MMBbls).
Total volumes are in millions of energy equivalent barrels (EEBs). For this
computation, one barrel is the equivalent of six thousand cubic feet. NGLs are
included with oil and condensate reserves and the associated shrinkage has been
deducted from the gas reserves.
Algerian reserves are shown in accordance with the PSA. The reserves
include estimated quantities allocated to Anadarko for recovery of costs and
Algerian taxes and Anadarko's net equity share after recovery of such costs.
Anadarko's reserves increased in 1997 primarily from exploration and
development drilling and improved recovery. At year-end 1997, the Company had
184.1 MMBbls of proved reserves in Algeria, including 59.8 MMBbls which were
added during 1997. Anadarko's reserves increase was offset partially by a
decrease due to lower natural gas and crude oil prices at year-end 1997 compared
to year-end 1996.
The Company's reserves increased in 1996 primarily from exploration and
development drilling and improved recovery. At year-end 1996, Anadarko had 124.3
MMBbls of proved reserves in Algeria, including 31.8 MMBbls which were added
during 1996. Anadarko's reserves also increased in 1996 due to higher natural
gas and crude oil prices at year-end 1996 compared to year-end 1995.
The Company's reserves increased in 1995 primarily from exploration and
development drilling and improved recovery. At year-end 1995, Anadarko had 92.5
MMBbls of oil reserves in Algeria, including 48.5 MMBbls which were added during
1995. Anadarko's reserves also increased in 1995 due to higher natural gas and
crude oil prices at year-end 1995 compared to year-end 1994.
The Company emphasizes that the volumes of reserves shown below are
estimates which, by their nature, are subject to revision. The estimates are
made using all available geological and reservoir data as well as production
performance data. These estimates are reviewed annually and revised, either
upward or downward, as warranted by additional performance data.
64
<PAGE> 66
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
OIL AND GAS RESERVES --(CONTINUED)
<TABLE>
<CAPTION>
NATURAL GAS OIL, CONDENSATE AND NGL TOTAL
(BCF) (MMBBLS) (MILLION EEBS)
------------------------- ----------------------------------- ---------------
U.S. INDONESIA TOTAL U.S. ALGERIA INDONESIA TOTAL U.S. ALGERIA
---- --------- ----- ---- ------- --------- ----- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED RESERVES
DECEMBER 31, 1994 1,914 -- 1,914 113.4 44.0 -- 157.4 432.4 44.0
Revisions of prior estimates 29 -- 29 2.6 -- -- 2.6 7.5 --
Extensions, discoveries and other
additions 70 -- 70 7.6 48.5 -- 56.1 19.3 48.5
Improved recovery 14 -- 14 14.0 -- -- 14.0 16.3 --
Purchases in place 18 -- 18 6.9 -- -- 6.9 9.8 --
Sales in place (30) -- (30) (6.8) -- -- (6.8) (11.9) --
Production (172) -- (172) (11.0) -- -- (11.0) (39.6) --
----- --- ----- ----- ----- ---- ----- ----- -----
DECEMBER 31, 1995 1,843 -- 1,843 126.7 92.5 -- 219.2 433.8 92.5
Revisions of prior estimates (17) -- (17) 11.4 -- -- 11.4 8.5 --
Extensions, discoveries and other
additions 152 47 199 36.2 31.8 9.9 77.9 61.9 31.8
Improved recovery 6 -- 6 9.4 -- -- 9.4 10.4 --
Purchases in place 5 -- 5 0.4 -- -- 0.4 1.1 --
Sales in place (3) (47) (50) (0.4) -- (9.9) (10.3) (1.0) --
Production (165) -- (165) (10.2) -- -- (10.2) (37.7) --
----- --- ----- ----- ----- ---- ----- ----- -----
DECEMBER 31, 1996 1,821 -- 1,821 173.5 124.3 -- 297.8 477.0 124.3
Revisions of prior estimates (95) -- (95) 13.2 -- -- 13.2 (2.7) --
Extensions, discoveries and other
additions 164 -- 164 38.6 59.8 -- 98.4 66.1 59.8
Improved recovery 6 -- 6 19.9 -- -- 19.9 20.8 --
Purchases in place 18 -- 18 5.0 -- -- 5.0 8.0 --
Sales in place (5) -- (5) (0.1) -- -- (0.1) (1.0) --
Production (179) -- (179) (14.5) -- -- (14.5) (44.3) --
----- --- ----- ----- ----- ---- ----- ----- -----
DECEMBER 31, 1997 1,730 -- 1,730 235.6 184.1 -- 419.7 523.9 184.1
----- --- ----- ----- ----- ---- ----- ----- -----
PROVED DEVELOPED RESERVES
December 31, 1994 1,787 -- 1,787 74.2 -- -- 74.2 372.0 --
December 31, 1995 1,737 -- 1,737 77.5 -- -- 77.5 367.0 --
December 31, 1996 1,654 -- 1,654 100.6 -- -- 100.6 376.2 --
December 31, 1997 1,597 -- 1,597 122.6 -- -- 122.6 388.7 --
<CAPTION>
TOTAL
(MILLION EEBS)
-----------------
INDONESIA TOTAL
--------- -----
<S> <C> <C>
PROVED RESERVES
DECEMBER 31, 1994 -- 476.4
Revisions of prior estimates -- 7.5
Extensions, discoveries and other
additions -- 67.8
Improved recovery -- 16.3
Purchases in place -- 9.8
Sales in place -- (11.9)
Production -- (39.6)
----- -----
DECEMBER 31, 1995 -- 526.3
Revisions of prior estimates -- 8.5
Extensions, discoveries and other
additions 17.7 111.4
Improved recovery -- 10.4
Purchases in place -- 1.1
Sales in place (17.7) (18.7)
Production -- (37.7)
----- -----
DECEMBER 31, 1996 -- 601.3
Revisions of prior estimates -- (2.7)
Extensions, discoveries and other
additions -- 125.9
Improved recovery -- 20.8
Purchases in place -- 8.0
Sales in place -- (1.0)
Production -- (44.3)
----- -----
DECEMBER 31, 1997 -- 708.0
----- -----
PROVED DEVELOPED RESERVES
December 31, 1994 -- 372.0
December 31, 1995 -- 367.0
December 31, 1996 -- 376.2
December 31, 1997 -- 388.7
</TABLE>
65
<PAGE> 67
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
DISCOUNTED FUTURE NET CASH FLOWS
Estimates of future net cash flows from proved reserves of gas, oil,
condensate and NGLs were made in accordance with SFAS No. 69, "Disclosures about
Oil and Gas Producing Activities." The amounts were prepared by the Company's
engineers and are shown in the following table. The estimates are based on
prices at year-end. Commodity prices have decreased since year-end 1997. Further
declines in commodity prices could negatively impact the carrying value of the
Company's oil and gas properties.
Gas prices are escalated only for fixed and determinable amounts under
provisions in some contracts. Estimated future cash inflows are reduced by
estimated future development and production costs based on year-end cost levels,
assuming continuation of existing economic conditions, and by estimated future
income tax expense. Income tax expense, both U.S. and foreign, is calculated by
applying the existing statutory tax rates, including any known future changes,
to the pretax net cash flows giving effect to any permanent differences and
reduced by the applicable tax basis. The effect of tax credits are considered in
determining the income tax expense.
At December 31, 1997, the present value (discounted at ten percent) of
future net revenues from Anadarko's proved reserves was $3.0 billion, before
income taxes, and $2.0 billion, after income taxes, (stated in accordance with
the regulations of the Securities and Exchange Commission and the Financial
Accounting Standards Board). The after income taxes decrease of 41 percent in
1997 compared to 1996 is primarily due to the significantly lower natural gas
and crude oil prices at year-end 1997, partially offset by additions of proved
reserves related to successful exploration and development drilling.
The present value of future net revenues does not purport to be an estimate
of the fair market value of Anadarko's proved reserves. An estimate of fair
value would also take into account, among other things, anticipated changes in
future prices and costs, the expected recovery of reserves in excess of proved
reserves and a discount factor more representative of the time value of money
and the risks inherent in producing oil and gas. Significant changes in
estimated reserve volumes or commodity prices could have a material effect on
the Company's consolidated financial statements.
66
<PAGE> 68
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES
<TABLE>
<CAPTION>
1997 1996 1995
millions ------ ------- ------
<S> <C> <C> <C>
UNITED STATES
Future cash inflows $6,500 $11,076 $5,621
Future production and development costs 2,494 2,908 1,847
------ ------- ------
Future net cash flows before income taxes 4,006 8,168 3,774
10% annual discount for estimated timing of cash flows 1,944 3,907 1,712
------ ------- ------
Discounted future net cash flows before income taxes 2,062 4,261 2,062
Future income taxes, net of 10% annual discount 654 1,450 613
------ ------- ------
Standardized measure of discounted future net cash flows
relating
to oil and gas reserves 1,408 2,811 1,449
------ ------- ------
ALGERIA
Future cash inflows 3,092 3,263 1,907
Future production and development costs 743 813 572
------ ------- ------
Future net cash flows before income taxes 2,349 2,450 1,335
10% annual discount for estimated timing of cash flows 1,382 1,441 836
------ ------- ------
Discounted future net cash flows before income taxes 967 1,009 499
Future income taxes, net of 10% annual discount 364 417 214
------ ------- ------
Standardized measure of discounted future net cash flows
relating
to oil and gas reserves 603 592 285
------ ------- ------
TOTAL
Future cash inflows 9,592 14,339 7,528
Future production and development costs 3,237 3,721 2,419
------ ------- ------
Future net cash flows before income taxes 6,355 10,618 5,109
10% annual discount for estimated timing of cash flows 3,326 5,348 2,548
------ ------- ------
Discounted future net cash flows before income taxes 3,029 5,270 2,561
Future income taxes, net of 10% annual discount 1,018 1,867 827
------ ------- ------
Standardized measure of discounted future net cash flows
relating
to oil and gas reserves $2,011 $ 3,403 $1,734
------ ------- ------
</TABLE>
67
<PAGE> 69
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES
<TABLE>
<CAPTION>
1997 1996 1995
millions ------ ------ ------
<S> <C> <C> <C>
UNITED STATES
Beginning of year $2,811 $1,449 $1,234
Sales and transfers of oil and gas produced, net of
production costs (496) (399) (287)
Net changes in prices and development and production costs (2,443) 1,730 293
Extensions, discoveries, additions and improved recovery,
less related costs 330 452 191
Development costs incurred during the period 30 53 23
Revisions of previous quantity estimates (148) 161 20
Purchases of minerals in place 11 14 42
Sales of minerals in place -- (11) (60)
Accretion of discount 426 206 175
Net change in income taxes 797 (836) (95)
Other 90 (8) (87)
------ ------ ------
End of year 1,408 2,811 1,449
------ ------ ------
ALGERIA
Beginning of year 592 285 158
Net changes in prices and development and production costs (491) 260 98
Extensions, discoveries, additions and improved recovery,
less related costs 253 166 108
Development costs incurred during the period 88 29 5
Accretion of discount 101 50 26
Net change in income taxes 52 (203) (112)
Other 8 5 2
------ ------ ------
End of year 603 592 285
------ ------ ------
TOTAL *
Beginning of year 3,403 1,734 1,392
Sales and transfers of oil and gas produced, net of
production costs (496) (399) (287)
Net changes in prices and development and production costs (2,934) 1,990 391
Extensions, discoveries, additions and improved recovery,
less related costs 583 618 299
Development costs incurred during the period 118 82 28
Revisions of previous quantity estimates (148) 161 20
Purchases of minerals in place 11 14 42
Sales of minerals in place -- (11) (60)
Accretion of discount 527 256 201
Net change in income taxes 849 (1,039) (207)
Other 98 (3) (85)
------ ------ ------
End of year $2,011 $3,403 $1,734
------ ------ ------
</TABLE>
- ---------------
* Excludes changes in the standardized measure of discounted future net cash
flows for Indonesia reserves which were both added and sold during 1996.
68
<PAGE> 70
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See Anadarko Board of Directors and Section 16(a) Beneficial Ownership
Reporting Compliance in the Anadarko Petroleum Corporation Proxy Statement,
dated March 23, 1998 (Proxy Statement), which is incorporated herein by
reference.
See list of Executive Officers of the Registrant appearing under Item 4 of
this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
See Anadarko Board of Directors -- Director's Compensation and Compensation
and Benefits Committee Report on 1997 Executive Compensation in the Proxy
Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See Stock Ownership in the Proxy Statement, which is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Transactions with Management and Others in the Proxy Statement, which
is incorporated herein by reference.
69
<PAGE> 71
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report or
incorporated by reference:
(1) The consolidated financial statements of Anadarko Petroleum
Corporation are listed on the Index to this report, page 34.
(2) Exhibits not incorporated by reference to a prior filing are
designated by an asterisk (*) and are filed herewith; all exhibits
not so designated are incorporated herein by reference to a prior
filing as indicated.
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------------------------------------- ------------------------------- ------
<C> <S> <C> <C> <C>
3(a) Restated Certificate of Incorporation of 19(a)(i) to Form 10-Q 1-8968
Anadarko Petroleum Corporation, dated for quarter ended September 30,
August 28, 1986 1986
(b) By-laws of Anadarko Petroleum 3(b) to Form 10-Q 1-8968
Corporation, as amended for quarter ended
June 30, 1996
4(a) Rights Agreement, dated as of October 4, 4 to Form 8-K dated October 5, 1-8968
1988, between Anadarko Petroleum 1988
Corporation and Manufacturers Hanover
Trust Company, Rights Agent
(b) Indenture, dated as of May 10, 1988, 4(a) to Form S-3 Registration 33-21094
between Anadarko Petroleum Corporation Statement
and Continental Illinois National Bank
and Trust Company of Chicago, Trustee
(c) First Supplemental Indenture, dated as of 4(d) to Form 10-K 1-8968
November 15, 1991, between Anadarko for year ended
Petroleum Corporation and Continental December 31, 1991
Bank, National Association, Trustee
(d) Credit Agreement, dated as of May 24, 4.1 to Form S-8 dated July 8, 1-8968
1994 1994
(e) Amendment to Credit Agreement, dated as 4(e) to Form 10-K for year 1-8968
of May 23, 1995 ended December 31, 1995
(f) Amendment to Credit Agreement, dated as 4(f) to Form 10-K for year 1-8968
of May 21, 1996 ended December 31, 1996
(g) Amendment to Credit Agreement, dated as 4(a) to Form 10-Q 1-8968
of June 13, 1997 for the quarter ended
June 30, 1997
(h) Indenture, dated as of March 1, 1995, 4(a) to Form 10-Q 1-8968
between Anadarko Petroleum Corporation for the quarter ended
and the Chase Manhattan Bank, N.A., June 30, 1995
Trustee
(i) Distribution Agreement, dated as of March 4(b) to Form 10-Q 1-8968
9, 1995, for $300,000,000 Medium-Term for the quarter ended
Notes, Series A June 30, 1995
*(j) Indenture, dated as of September 1, 1997,
between Anadarko Petroleum Corporation
and Harris Trust and Savings Bank,
Trustee
10(a) (i) Tax Sharing Agreement, dated September 19(c)(i) to Form 10-Q 1-8968
30, 1986, among Panhandle Eastern for quarter ended
Corporation, Centana Energy Corporation September 30, 1986
and Anadarko
Petroleum Corporation
</TABLE>
70
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------------------------------------- ------------------------------- ------
<C> <S> <C> <C> <C>
10(a) (ii) Spin-Off Agreement, dated September 30, 10(a)(iii) to Form 10-K for 1-8968
1986, between Panhandle Eastern year ended
Corporation and Anadarko Petroleum December 31, 1988
Corporation
(iii) Global Settlement Agreement between 28(a) to Form 10-Q 1-8968
Panhandle Eastern Corporation and for quarter ended
Anadarko Petroleum Corporation, dated March 31, 1989
March 31, 1989
(iv) Agreement for Exploration and 10 to Form 10-Q 1-8968
Exploitation of Liquid Hydrocarbons for quarter ended March 31,
between Anadarko Algeria Corporation and 1997
SONATRACH, dated October 23, 1989
(Confidential treatment requested for
certain provisions pursuant to Rule 24b-2
under the Securities Exchange Act of
1934).
DIRECTOR AND EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10(b) (i) Director Deferred Compensation Plan of 10(b)(viii) to Form 10-K for 1-8968
Anadarko Petroleum Corporation, effective year ended
January 1, 1987 December 31, 1986
* (ii) Amendment to Anadarko Petroleum
Corporation Director Deferred
Compensation Plan
(iii) Director Deferred Compensation Agreement 19(a)(i) to Form 10-Q 1-8968
between Anadarko Petroleum Corporation for quarter ended
and each Director Electing to Participate March 31, 1987
* (iv) First Amendment to Director Deferred
Compensation Agreement 1987, 1988, 1989
and 1990 Plan Years
(v) Anadarko Petroleum Corporation 1988 Stock 19(b) to Form 10-Q 1-8968
Option Plan for Non-Employee Directors for quarter ended
September 30, 1988
(vi) Anadarko Petroleum Corporation Amended 99 - Attachment A to Form 10-K 1-8968
and Restated 1988 Stock Option Plan for for year ended December 31,
Non-Employee Directors 1993
* (vii) Amendment to Anadarko Petroleum
Corporation 1988 Stock Option Plan for
Non-Employee Directors
* (viii) Second Amendment to Anadarko Petroleum
Corporation 1988 Stock Option Plan for
Non-Employee Directors
(ix) Anadarko Petroleum Corporation and 19(c)(ix) to Form 10-Q for 1-8968
Participating Affiliates and Subsidiaries quarter ended
Annual Override Pool Bonus Plan, as September 30, 1986
amended October 6, 1986
(x) Second Amendment to Anadarko Petroleum 10(b)(ii) to Form 10-K 1-8968
Corporation and Participating Affiliates for year ended
and Subsidiaries Annual Override Pool December 31, 1987
Bonus Plan
(xi) Restatement of the Anadarko Petroleum Post Effective Amendment No. 1 33-22134
Corporation 1987 Stock Option Plan (and to Forms S-8 and S-3, Anadarko
Related Agreement) Petroleum Corporation 1987
Stock Option Plan
</TABLE>
71
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------------------------------------- ------------------------------- ------
<C> <S> <C> <C> <C>
*10(b) (xii) First Amendment to Restatement of the
Anadarko Petroleum Corporation 1987 Stock
Option Plan
(xiii) 1993 Stock Incentive Plan 10(b)(xii) to Form 10-K for 1-8968
year ended
December 31, 1993
(xiv) First Amendment to Anadarko Petroleum 99-Attachment A to Form 10-K 1-8968
Corporation 1993 Stock Incentive Plan for year ended December 31,
1996
* (xv) Second Amendment to Anadarko Petroleum
Corporation 1993 Stock Incentive Plan
(xvi) Anadarko Petroleum Corporation 1993 Stock 10(a) to Form 10-Q 1-8968
Incentive Plan Stock Option Agreement for quarter ended March 31,
1996
* (xvii) Form of Anadarko Petroleum Corporation
1993 Stock Incentive Plan Stock Option
Agreement
* (xviii) Form of Anadarko Petroleum Corporation
1993 Stock Incentive Plan Restricted
Stock Agreement
(xix) Anadarko Petroleum Corporation 1993 Stock 10(b) to Form 10-Q 1-8968
Incentive Plan Performance Share for quarter ended March 31,
Agreement 1996
* (xx) Form of Anadarko Petroleum Corporation
1993 Stock Incentive Plan Performance
Share Agreement
(xxi) Annual Incentive Bonus Plan 10(b)(xiii) to Form 10-K for 1-8968
year ended
December 31, 1993
* (xxii) Key Employee Change of Control Contract
(xxiii) Executive Deferred Compensation Plan of 10(b)(xii) to Form 10-K for 1-8968
Anadarko Petroleum Corporation and year ended
Participating Subsidiaries and December 31, 1987
Affiliates, effective October 1, 1986
(xxiv) Executive Deferred Compensation Plan of 10(b)(vi) to Form 10-K for year 1-8968
Anadarko Petroleum Corporation, effective ended
January 1, 1987 December 31, 1986
* (xxv) Amendment to Anadarko Petroleum
Corporation Executive Deferred
Compensation Plan
(xxvi) Executive Deferred Compensation Agreement 19(a)(ii) to Form 10-Q 1-8968
between Anadarko Petroleum Corporation for quarter ended March 31,
and each Executive Electing to 1987
Participate
* (xxvii) First Amendment to Executive Deferred
Compensation Agreement 1987, 1988, 1989
and 1990 Plan Years
(xxviii) Amendments to Executive Deferred 10(b)(xv) to Form 10-K for year 1-8968
Compensation Agreement between Anadarko ended
Petroleum Corporation and each Executive December 31, 1987
Electing to Participate
</TABLE>
72
<PAGE> 74
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------------------------------------- ------------------------------- ------
<C> <S> <C> <C> <C>
10(b) (xxix) Anadarko Retirement Restoration Plan, 10(b)(xix) to Form 10-K for 1-8968
effective January 1, 1995 year ended
December 31, 1995
(xxx) Anadarko Savings Restoration Plan, 10(b)(xx) to Form 10-K for year 1-8968
effective January 1, 1995 ended
December 31, 1995
* (xxxi) Amendment to Amended and Restated
Anadarko Savings Restoration Plan
(xxxii) Plan Agreement for the Management Life 10(b)(xxi) to Form 10-K for 1-8968
Insurance Plan between Anadarko Petroleum year ended
Corporation and each Eligible Employee, December 31, 1995
effective July 1, 1995
*12 Computation of Ratios of Earnings to
Fixed Charges and Earnings to Combined
Fixed Charges and Preferred Stock
Dividends
*13 Portions of the Anadarko Petroleum
Corporation 1997 Annual Report to
Stockholders
*21 List of Significant Subsidiaries:
Anadarko Algeria Corporation,
a Delaware corporation,
Anadarko Energy Services Company,
a Delaware corporation,
Anadarko Gathering Company,
a Delaware corporation.
*23 Consents of Experts and Counsel
Consent of KPMG Peat Marwick LLP
*24 Powers of Attorney
*27 Financial Data Schedule
99 Anadarko Petroleum Corporation Proxy Filed on March 16, 1998
Statement, dated March 23, 1998
</TABLE>
- ---------------
The total amount of securities of the registrant authorized under any instrument
with respect to long-term debt not filed as an Exhibit does not exceed ten
percent of the total assets of the registrant and its subsidiaries on a
consolidated basis. The registrant agrees, upon request of the Securities and
Exchange Commission, to furnish copies of any or all of such instruments to the
Securities and Exchange Commission.
(B) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K during the three months ended
December 31, 1997.
73
<PAGE> 75
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
ANADARKO PETROLEUM CORPORATION
March 18, 1998 By: /s/ MICHAEL E. ROSE
----------------------------------
(Michael E. Rose, Senior Vice
President, Finance and Chief
Financial Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 18, 1998.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE
------------------ -----
<S> <C> <C>
(i) Principal executive officer:*
ROBERT J. ALLISON, JR. Chairman of the Board, President and Chief
----------------------------------------------------- Executive Officer
(Robert J. Allison, Jr.)
(ii) Principal financial officer:*
MICHAEL E. ROSE Senior Vice President, Finance and Chief
----------------------------------------------------- Financial Officer
(Michael E. Rose)
(iii) Principal accounting officer:*
JAMES R. LARSON Vice President and Controller
-----------------------------------------------------
(James R. Larson)
(iv) Directors:*
ROBERT J. ALLISON, JR.
CONRAD P. ALBERT
LARRY BARCUS
RONALD BROWN
JAMES L. BRYAN
JOHN R. BUTLER, JR.
JOHN R. GORDON
JOHN N. SEITZ
</TABLE>
- ---------------
* Signed on behalf of each of these persons and on his own behalf:
<TABLE>
<S> <C> <C>
By /s/ MICHAEL E. ROSE
-------------------------------------------------------
(Michael E. Rose, Attorney-in-Fact)
</TABLE>
74
<PAGE> 76
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------------------------------------- ------------------------------- ------
<C> <S> <C> <C> <C>
3(a) Restated Certificate of Incorporation of 19(a)(i) to Form 10-Q 1-8968
Anadarko Petroleum Corporation, dated for quarter ended September 30,
August 28, 1986 1986
(b) By-laws of Anadarko Petroleum 3(b) to Form 10-Q 1-8968
Corporation, as amended for quarter ended
June 30, 1996
4(a) Rights Agreement, dated as of October 4, 4 to Form 8-K dated October 5, 1-8968
1988, between Anadarko Petroleum 1988
Corporation and Manufacturers Hanover
Trust Company, Rights Agent
(b) Indenture, dated as of May 10, 1988, 4(a) to Form S-3 Registration 33-21094
between Anadarko Petroleum Corporation Statement
and Continental Illinois National Bank
and Trust Company of Chicago, Trustee
(c) First Supplemental Indenture, dated as of 4(d) to Form 10-K 1-8968
November 15, 1991, between Anadarko for year ended
Petroleum Corporation and Continental December 31, 1991
Bank, National Association, Trustee
(d) Credit Agreement, dated as of May 24, 4.1 to Form S-8 dated July 8, 1-8968
1994 1994
(e) Amendment to Credit Agreement, dated as 4(e) to Form 10-K for year 1-8968
of May 23, 1995 ended December 31, 1995
(f) Amendment to Credit Agreement, dated as 4(f) to Form 10-K for year 1-8968
of May 21, 1996 ended December 31, 1996
(g) Amendment to Credit Agreement, dated as 4(a) to Form 10-Q 1-8968
of June 13, 1997 for the quarter ended
June 30, 1997
(h) Indenture, dated as of March 1, 1995, 4(a) to Form 10-Q 1-8968
between Anadarko Petroleum Corporation for the quarter ended
and the Chase Manhattan Bank, N.A., June 30, 1995
Trustee
(i) Distribution Agreement, dated as of March 4(b) to Form 10-Q 1-8968
9, 1995, for $300,000,000 Medium-Term for the quarter ended
Notes, Series A June 30, 1995
*(j) Indenture, dated as of September 1, 1997,
between Anadarko Petroleum Corporation
and Harris Trust and Savings Bank,
Trustee
10(a) (i) Tax Sharing Agreement, dated September 19(c)(i) to Form 10-Q 1-8968
30, 1986, among Panhandle Eastern for quarter ended
Corporation, Centana Energy Corporation September 30, 1986
and Anadarko
Petroleum Corporation
(ii) Spin-Off Agreement, dated September 30, 10(a)(iii) to Form 10-K for 1-8968
1986, between Panhandle Eastern year ended
Corporation and Anadarko Petroleum December 31, 1988
Corporation
(iii) Global Settlement Agreement between 28(a) to Form 10-Q 1-8968
Panhandle Eastern Corporation and for quarter ended
Anadarko Petroleum Corporation, dated March 31, 1989
March 31, 1989
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------------------------------------- ------------------------------- ------
<C> <S> <C> <C> <C>
10(a) (iv) Agreement for Exploration and 10 to Form 10-Q 1-8968
Exploitation of Liquid Hydrocarbons for quarter ended March 31,
between Anadarko Algeria Corporation and 1997
SONATRACH, dated October 23, 1989
(Confidential treatment requested for
certain provisions pursuant to Rule 24b-2
under the Securities Exchange Act of
1934).
DIRECTOR AND EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10(b) (i) Director Deferred Compensation Plan of 10(b)(viii) to Form 10-K for 1-8968
Anadarko Petroleum Corporation, effective year ended
January 1, 1987 December 31, 1986
* (ii) Amendment to Anadarko Petroleum
Corporation Director Deferred
Compensation Plan
(iii) Director Deferred Compensation Agreement 19(a)(i) to Form 10-Q 1-8968
between Anadarko Petroleum Corporation for quarter ended
and each Director Electing to Participate March 31, 1987
* (iv) First Amendment to Director Deferred
Compensation Agreement 1987, 1988, 1989
and 1990 Plan Years
(v) Anadarko Petroleum Corporation 1988 Stock 19(b) to Form 10-Q 1-8968
Option Plan for Non-Employee Directors for quarter ended
September 30, 1988
(vi) Anadarko Petroleum Corporation Amended 99 - Attachment A to Form 10-K 1-8968
and Restated 1988 Stock Option Plan for for year ended December 31,
Non-Employee Directors 1993
* (vii) Amendment to Anadarko Petroleum
Corporation 1988 Stock Option Plan for
Non-Employee Directors
* (viii) Second Amendment to Anadarko Petroleum
Corporation 1988 Stock Option Plan for
Non-Employee Directors
(ix) Anadarko Petroleum Corporation and 19(c)(ix) to Form 10-Q for 1-8968
Participating Affiliates and Subsidiaries quarter ended
Annual Override Pool Bonus Plan, as September 30, 1986
amended October 6, 1986
(x) Second Amendment to Anadarko Petroleum 10(b)(ii) to Form 10-K 1-8968
Corporation and Participating Affiliates for year ended
and Subsidiaries Annual Override Pool December 31, 1987
Bonus Plan
(xi) Restatement of the Anadarko Petroleum Post Effective Amendment No. 1 33-22134
Corporation 1987 Stock Option Plan (and to Forms S-8 and S-3, Anadarko
Related Agreement) Petroleum Corporation 1987
Stock Option Plan
* (xii) First Amendment to Restatement of the
Anadarko Petroleum Corporation 1987 Stock
Option Plan
(xiii) 1993 Stock Incentive Plan 10(b)(xii) to Form 10-K for 1-8968
year ended
December 31, 1993
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------------------------------------- ------------------------------- ------
<C> <S> <C> <C> <C>
10(b) (xiv) First Amendment to Anadarko Petroleum 99-Attachment A to Form 10-K 1-8968
Corporation 1993 Stock Incentive Plan for year ended December 31,
1996
* (xv) Second Amendment to Anadarko Petroleum
Corporation 1993 Stock Incentive Plan
(xvi) Anadarko Petroleum Corporation 1993 Stock 10(a) to Form 10-Q 1-8968
Incentive Plan Stock Option Agreement for quarter ended March 31,
1996
* (xvii) Form of Anadarko Petroleum Corporation
1993 Stock Incentive Plan Stock Option
Agreement
* (xviii) Form of Anadarko Petroleum Corporation
1993 Stock Incentive Plan Restricted
Stock Agreement
(xix) Anadarko Petroleum Corporation 1993 Stock 10(b) to Form 10-Q 1-8968
Incentive Plan Performance Share for quarter ended March 31,
Agreement 1996
* (xx) Form of Anadarko Petroleum Corporation
1993 Stock Incentive Plan Performance
Share Agreement
(xxi) Annual Incentive Bonus Plan 10(b)(xiii) to Form 10-K for 1-8968
year ended
December 31, 1993
* (xxii) Key Employee Change of Control Contract
(xxiii) Executive Deferred Compensation Plan of 10(b)(xii) to Form 10-K for 1-8968
Anadarko Petroleum Corporation and year ended
Participating Subsidiaries and December 31, 1987
Affiliates, effective October 1, 1986
(xxiv) Executive Deferred Compensation Plan of 10(b)(vi) to Form 10-K for year 1-8968
Anadarko Petroleum Corporation, effective ended
January 1, 1987 December 31, 1986
* (xxv) Amendment to Anadarko Petroleum
Corporation Executive Deferred
Compensation Plan
(xxvi) Executive Deferred Compensation Agreement 19(a)(ii) to Form 10-Q 1-8968
between Anadarko Petroleum Corporation for quarter ended March 31,
and each Executive Electing to 1987
Participate
* (xxvii) First Amendment to Executive Deferred
Compensation Agreement 1987, 1988, 1989
and 1990 Plan Years
(xxviii) Amendments to Executive Deferred 10(b)(xv) to Form 10-K for year 1-8968
Compensation Agreement between Anadarko ended
Petroleum Corporation and each Executive December 31, 1987
Electing to Participate
(xxix) Anadarko Retirement Restoration Plan, 10(b)(xix) to Form 10-K for 1-8968
effective January 1, 1995 year ended
December 31, 1995
(xxx) Anadarko Savings Restoration Plan, 10(b)(xx) to Form 10-K for year 1-8968
effective January 1, 1995 ended
December 31, 1995
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------------------------------------- ------------------------------- ------
<C> <S> <C> <C> <C>
* (xxxi) Amendment to Amended and Restated
Anadarko Savings Restoration Plan
(xxxii) Plan Agreement for the Management Life 10(b)(xxi) to Form 10-K for 1-8968
Insurance Plan between Anadarko Petroleum year ended
Corporation and each Eligible Employee, December 31, 1995
effective July 1, 1995
*12 Computation of Ratios of Earnings to
Fixed Charges and Earnings to Combined
Fixed Charges and Preferred Stock
Dividends
*13 Portions of the Anadarko Petroleum
Corporation 1997 Annual Report to
Stockholders
*21 List of Significant Subsidiaries:
Anadarko Algeria Corporation,
a Delaware corporation,
Anadarko Energy Services Company,
a Delaware corporation,
Anadarko Gathering Company,
a Delaware corporation.
*23 Consents of Experts and Counsel
Consent of KPMG Peat Marwick LLP
*24 Powers of Attorney
*27 Financial Data Schedule
99 Anadarko Petroleum Corporation Proxy Filed on March 16, 1998
Statement, dated March 23, 1998
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 4(j)
================================================================================
ANADARKO PETROLEUM CORPORATION
AND
HARRIS TRUST AND SAVINGS BANK
TRUSTEE
------------------
INDENTURE
DATED AS OF SEPTEMBER 1, 1997
------------------
SENIOR DEBT SECURITIES
================================================================================
<PAGE> 2
ANADARKO PETROLEUM CORPORATION
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED, AND
INDENTURE, DATED AS OF SEPTEMBER 1, 1997
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<C> <S> <C> <C>
sec. 310(a) (1) .......................................... 609
(a) (2) .......................................... 609
(a) (3) .......................................... Not Applicable
(a) (4) .......................................... Not Applicable
(a) (5) .......................................... 609
(b) .......................................... 608
sec. 311 .......................................... 613
sec. 312(a) .......................................... 701
702(a)
(b) .......................................... 702(b)
(c) .......................................... 702(c)
sec. 313(a) .......................................... 703
(b) .......................................... *
(c) .......................................... *
(d) .......................................... 703
sec. 314(a) .......................................... 704
(a) (4) .......................................... 1006
(b) .......................................... Not Applicable
(c) (1) .......................................... 102
(c) (2) .......................................... 102
(c) (3) .......................................... Not Applicable
(d) .......................................... Not Applicable
(e) .......................................... 102
sec. 315(a) .......................................... 601(a)
(b) .......................................... 602
(c) .......................................... 601(b)
(d) .......................................... 601(c)
(d) (1) .......................................... 601(a)(1)
(d) (2) .......................................... 601(c)(2)
(d) (3) .......................................... 601(c)(3)
(e) .......................................... 514
sec. 316(a) .......................................... 101
(a) (1)(A) .......................................... 502
512
(a) (1)(B) .......................................... 513
(a) (2) .......................................... Not Applicable
(b) .......................................... 508
(c) .......................................... 104(d)
sec. 317(a) (1) .......................................... 503
(a) (2) .......................................... 504
(b) .......................................... 1003
sec. 318(a) .......................................... 107
</TABLE>
- ------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
* Deemed included pursuant to Section 318(c) of the Trust Indenture Act
<PAGE> 3
TABLE OF CONTENTS
------------------
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PARTIES............................................................. 1
RECITALS OF THE COMPANY............................................. 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions:
Act................................................ 2
Affiliate; control................................. 2
Authenticating Agent............................... 2
Board of Directors................................. 2
Board Resolution................................... 2
Business Day....................................... 3
Commission......................................... 3
Company............................................ 3
Company Request; Company Order..................... 3
Consolidated Net Tangible Assets................... 3
Corporate Trust Office............................. 3
Defaulted Interest................................. 3
Depositary......................................... 4
Event of Default................................... 4
Funded Debt........................................ 4
Global Security.................................... 4
Holder............................................. 4
Indebtedness....................................... 4
Indenture.......................................... 4
Interest........................................... 4
Interest Payment Date.............................. 4
Maturity........................................... 4
Mortgage........................................... 5
Officers' Certificate.............................. 5
Opinion of Counsel................................. 5
Original Issue Discount Security................... 5
Outstanding........................................ 5
Paying Agent....................................... 6
Person............................................. 6
</TABLE>
- ------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
<PAGE> 4
ii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Place of Payment................................... 6
Predecessor Security............................... 6
Principal Property................................. 6
Redemption Date.................................... 7
Redemption Price................................... 7
Regular Record Date................................ 7
Responsible Officer................................ 7
Restricted Subsidiary.............................. 7
Securities......................................... 7
Security Register and Security Registrar........... 7
Special Record Date................................ 8
Stated Maturity.................................... 8
Subsidiary......................................... 8
Trustee............................................ 8
Trust Indenture Act................................ 8
Vice President..................................... 8
SECTION 102. Compliance Certificates and Opinions............... 8
SECTION 103. Form of Documents Delivered to Trustee............. 9
SECTION 104. Acts of Holders.................................... 10
SECTION 105. Notices, Etc., to Trustee and Company.............. 11
SECTION 106. Notice to Holders; Waiver.......................... 11
SECTION 107. Conflict with Trust Indenture Act.................. 12
SECTION 108. Effect of Headings and Table of Contents........... 12
SECTION 109. Successors and Assigns............................. 12
SECTION 110. Separability Clause................................ 12
SECTION 111. Benefits of Indenture.............................. 12
SECTION 112. Governing Law...................................... 13
SECTION 113. Legal Holidays..................................... 13
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.................................... 13
SECTION 202. Form of Face of Security........................... 14
SECTION 203. Form of Reverse of Security........................ 16
SECTION 204. Form of Trustee's Certificate of Authentication.... 21
</TABLE>
<PAGE> 5
iii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series............... 21
SECTION 302. Denominations...................................... 23
SECTION 303. Execution, Authentication, Delivery and Dating..... 24
SECTION 304. Temporary Securities............................... 25
SECTION 305. Registration, Registration of Transfer and
Exchange......................................... 26
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities... 29
SECTION 307. Payment of Interest; Interest Rights Preserved..... 30
SECTION 308. Persons Deemed Owners.............................. 31
SECTION 309. Cancellation....................................... 32
SECTION 310. Computation of Interest............................ 32
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture............ 32
SECTION 402. Application of Trust Money......................... 34
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.................................. 34
SECTION 502. Acceleration of Maturity; Rescission and
Annulment........................................ 36
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee........................... 37
SECTION 504. Trustee May File Proofs of Claim................... 38
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities....................................... 39
SECTION 506. Application of Money Collected..................... 39
SECTION 507. Limitation on Suits................................ 40
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.................. 40
SECTION 509. Restoration of Rights and Remedies................. 41
</TABLE>
<PAGE> 6
iv
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 510. Rights and Remedies Cumulative..................... 41
SECTION 511. Delay or Omission Not Waiver....................... 41
SECTION 512. Control by Holders................................. 41
SECTION 513. Waiver of Past Defaults............................ 42
SECTION 514. Undertaking for Costs.............................. 42
SECTION 515. Waiver of Stay or Extension Laws................... 43
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities................ 43
SECTION 602. Notice of Defaults................................. 45
SECTION 603. Certain Rights of Trustee.......................... 45
SECTION 604. Not Responsible for Recitals or Issuance of
Securities....................................... 46
SECTION 605. May Hold Securities................................ 47
SECTION 606. Money Held in Trust................................ 47
SECTION 607. Compensation and Reimbursement..................... 47
SECTION 608. Disqualification; Conflicting Interests............ 48
SECTION 609. Corporate Trustee Required; Eligibility............ 48
SECTION 610. Resignation and Removal; Appointment of
Successor........................................ 48
SECTION 611. Acceptance of Appointment by Successor............. 50
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business......................................... 52
SECTION 613. Preferential Collection of Claims Against
Company.......................................... 52
SECTION 614. Appointment of Authenticating Agent................ 53
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of
Holders.......................................... 55
SECTION 702. Preservation of Information; Communications
to Holders....................................... 55
SECTION 703. Reports by Trustee................................. 57
SECTION 704. Reports by Company................................. 57
</TABLE>
<PAGE> 7
v
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE EIGHT
CONSOLIDATION, MERGER AND SALE
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms.................................... 57
SECTION 802. Successor Substituted.............................. 58
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders.......................................... 58
SECTION 902. Supplemental Indentures with Consent of Holders.... 59
SECTION 903. Execution of Supplemental Indentures............... 61
SECTION 904. Effect of Supplemental Indentures.................. 61
SECTION 905. Conformity with Trust Indenture Act................ 61
SECTION 906. Reference in Securities to Supplemental
Indentures....................................... 61
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest......... 62
SECTION 1002. Maintenance of Office or Agency.................... 62
SECTION 1003. Money for Securities Payments to Be Held in
Trust............................................ 63
SECTION 1004. Corporate Existence................................ 64
SECTION 1005. Limitation on Liens................................ 65
SECTION 1006. Statement by Officers as to Default................ 67
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article........................... 67
SECTION 1102. Election to Redeem; Notice to Trustee.............. 68
SECTION 1103. Selection by Trustee of Securities to Be
Redeemed......................................... 68
SECTION 1104. Notice of Redemption............................... 69
SECTION 1105. Deposit of Redemption Price........................ 69
SECTION 1106. Securities Payable on Redemption Date.............. 70
SECTION 1107. Securities Redeemed in Part........................ 70
</TABLE>
<PAGE> 8
vi
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article........................... 71
SECTION 1202. Satisfaction of Sinking Fund Payments with
Securities....................................... 71
SECTION 1203. Redemption of Securities for Sinking Fund.......... 71
ARTICLE THIRTEEN
DEFEASANCE
SECTION 1301. Applicability of Article; Company's Option to
Effect Defeasance................................ 72
SECTION 1302. Defeasance and Discharge........................... 72
SECTION 1303. Conditions to Defeasance........................... 73
SECTION 1304. Deposited Money and U.S. Government Obligations to
be Held in Trust; Other Miscellaneous
Provisions....................................... 75
TESTIMONIUM......................................................... 76
SIGNATURES AND SEALS................................................ 76
ACKNOWLEDGMENTS..................................................... 77
</TABLE>
<PAGE> 9
PARTIES
INDENTURE, dated as of September 1, 1997, between ANADARKO PETROLEUM
CORPORATION, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
17001 Northchase Drive, Houston, Texas 77060, and Harris Trust and Savings Bank,
a banking corporation duly organized and existing under the laws of the State of
Illinois (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured senior
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
<PAGE> 10
2
101
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of this instrument; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee to act on
behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee. Where any provision of this
Indenture refers to action to be taken pursuant to a Board Resolution (including
the establishment of any series of the Securities and the forms and terms
thereof), such action may be taken by any committee, officer or employee of the
Company authorized to take such action by the Board of Directors as evidenced by
a Board Resolution.
<PAGE> 11
3
101
"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
to close.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President or
a Vice President, and by its Treasurer, an Assistant Treasurer, its Controller,
an Assistant Controller, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Net Tangible Assets" means the aggregate amount of assets of
the Company and its Restricted Subsidiaries (less applicable reserves and other
properly deductible items but including investments in non-consolidated Persons)
after deducting therefrom (a) all current liabilities (excluding any thereof
constituting Funded Debt by reason of being renewable or extendible at the
option of the obligor) and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on a consolidated balance sheet of the Company and its consolidated
Subsidiaries and computed in accordance with generally accepted accounting
principles.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered and
which, at the date hereof, is located at 311 West Monroe Street, Chicago,
Illinois 60603.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities of any series issuable
or issued in whole or in part in the form of one or more Global
<PAGE> 12
4
101
Securities, the Person designated as Depositary for the Securities of such
series by the Company pursuant to Section 301.
"Event of Default" has the meaning specified in Section 501.
"Funded Debt" means all indebtedness for money borrowed which is not by its
terms subordinated in right of payment to the prior payment in full of the
Securities, having a maturity of more than 12 months from the date as of which
the amount thereof is to be determined or having a maturity of less than 12
months but by its terms being (i) renewable or extendible beyond 12 months from
such date at the option of the obligor or (ii) issued in connection with a
commitment by a bank or other financial institution to lend so that such
indebtedness is treated as though it had a maturity in excess of 12 months
pursuant to generally accepted accounting principles.
"Global Security" means a Security evidencing all or part of a series of
Securities, issued to and registered in the name of the Depositary for the
Securities of such series or its nominee.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means any indebtedness for money borrowed or representing
the deferred purchase price of property or assets purchased.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of particular series of Securities established as contemplated
by Section 301.
"Interest", when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an instalment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an instalment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
<PAGE> 13
5
101
"Mortgage" means and includes any mortgage, pledge, lien, security
interest, conditional sale or other title retention agreement or other similar
encumbrance.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Controller, an Assistant Controller, the Secretary or an
Assistant Secretary, of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or counsel for the Company.
"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;
and
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder,
<PAGE> 14
6
101
Securities owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which the Trustee knows to
be so owned shall be so disregarded. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of (and premium, if any) and
interest on the Securities of that series are payable as contemplated by Section
301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Principal Property" means any manufacturing plant, processing plant,
property interest in oil, gas, coal or other minerals in place or in geothermal
resources in place, pipeline, warehouse, office building or interest in real
property which is located in the United States or offshore the United States and
owned by the Company or any Restricted Subsidiary, the gross book value (without
deduction of any depreciation or depletion reserves) of which on the date as of
which the determination is being made exceeds 2% of Consolidated Net Tangible
Assets, other than any such plant, property interest, pipeline, warehouse,
office building or interest in real property, or any portion of the foregoing,
which, in the opinion of the Board
<PAGE> 15
7
101
of Directors of the Company, is not of material importance to the total business
conducted by the Company and its Subsidiaries as an entirety.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means any
officer of the Trustee within the Corporate Trust Office, including any Vice
President, assistant secretary, assistant treasurer, assistant cashier, trust
officer, assistant trust officer or assistant controller assigned to the
Corporate Trust Office, or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer of the Trustee to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means a Subsidiary of the Company except a
Subsidiary (a) which neither transacts any substantial portion of its business
nor regularly maintains any substantial portion of its fixed assets within the
United States or offshore the United States or (b) which is engaged primarily in
financing the operations of the Company or its Subsidiaries, or both.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any instalment
of principal thereof or interest thereon, means the date specified
<PAGE> 16
8
101,102
in such Security as the fixed date on which the principal of such Security or
such instalment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which ordinarily
has voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as
in force at the date as of which this instrument was executed, except as
provided in Section 905.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
<PAGE> 17
9
102,103
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
<PAGE> 18
10
103,104
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgements of deeds, certifying that the individual signing such
instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security Register.
(d) If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by Board Resolution, fix in advance a record date (which may be
any date not less than 10 nor more than 60 days before such solicitation) for
the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent,
<PAGE> 19
11
104,105
waiver or other Act may be given before or after the record date, but only the
Holders of record at the close of business on the record date shall be deemed to
be Holders for the purposes of determining whether Holders of the requisite
proportion of the Outstanding Securities or a series thereof have authorized or
agreed or consented to such request, demand, authorization, direction, notice,
consent, waiver or other Act, and for that purpose the Outstanding Securities or
a series thereof shall be computed as of the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration, with a copy addressed to Bank of Montreal Trust
Company, One Wall Street Plaza, New York, New York 10005, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or sent by facsimile transmission to
(713) 874-3264 and confirmed by voice at (713) 874-3346, in either case to
the attention of Treasurer, or at any other address previously furnished in
writing to the Trustee by the Company.
<PAGE> 20
12
106,107,108,109,110
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with the duties
imposed by operation of Section 318(c) of the Trust Indenture Act, such imposed
duties shall control.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
<PAGE> 21
13
110,111,112,113,201
the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 112. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not be
made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, provided that no interest shall accrue for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the form set forth
in this Article, or in such other form or forms as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by
<PAGE> 22
14
201,202
their execution of the Securities. If the form or forms of Securities of any
series is established by action taken pursuant to a Board Resolution, either an
Officers' Certificate shall certify that such action shall have been duly taken
or a copy of an appropriate record of such action shall be certified by the
Secretary or an Assistant Secretary of the Company and, in either case,
delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 303 for the authentication and delivery of such
Securities.
The Trustee's certificates of authentication shall be in substantially the
form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
The forms of Global Securities of any series shall have such provisions and
legends as are customary for Securities of such series in global form, including
without limitation any legend required by the Depositary for the Securities of
such series.
SECTION 202. Form of Face of Security.
[If the Security is an Original Issue Discount Security, insert -- FOR
PURPOSES OF SECTION 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS
AMENDED, THE AMOUNT OF THE ORIGINAL ISSUE DISCOUNT IS ........, THE ISSUE DATE
IS ......, 19... [AND] [,] THE YIELD TO MATURITY IS ........ [.] [AND THE
ORIGINAL ISSUE DISCOUNT FOR THE SHORT ACCRUAL PERIOD IS ........ AND THE METHOD
USED TO DETERMINE THE YIELD THEREFOR IS ........] ]
ANADARKO PETROLEUM CORPORATION
........................................
No. ...... $......
ANADARKO PETROLEUM CORPORATION, a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to .......... ......................, or
registered assigns, the principal sum of .....
............................................... Dollars on ........
........................................ [If the Security is to bear
<PAGE> 23
15
202
interest prior to Maturity, insert -- , and to pay interest thereon from ......
.... or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semi-annually on ...... and ...... in each year,
commencing ......, at the rate of ....% per annum, until the principal hereof is
paid or made available for payment. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the .... or .... (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture].
[If the Security is not to bear interest prior to Maturity, insert -- The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of ....% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
default in payment to the date payment of such principal has been made or duly
provided for. Interest on any overdue principal shall be payable on demand. Any
such interest on any overdue principal that is not so paid on demand shall bear
interest at the rate of ....% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
demand for payment to the date payment of such interest has been made or duly
provided for, and such interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
insert -- any such] interest on this Security will be made at the office or
agency of the Company maintained for that purpose in ......, in such coin or
currency of the United States of America as at the time of payment is
<PAGE> 24
16
202,203
legal tender for payment of public and private debts; provided, however, that at
the option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
ANADARKO PETROLEUM CORPORATION
By...................................
Attest:
..................................
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of senior securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of September 1, 1997 (herein called the
"Indenture"), between the Company and Harris Trust and Savings Bank (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof [, limited in aggregate principal amount to $............].
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than ... days' notice by mail, [if applicable,
insert -- (1) on .............. in any year commencing with the year .... and
ending with the year .... through operation of the sinking fund for this
<PAGE> 25
17
203
series at a Redemption Price equal to 100% of the principal amount, and (2)] at
any time [on or after .........., 19...], as a whole or in part, at the election
of the Company, at the following Redemption Prices (expressed as percentages of
the principal amount): If redeemed [on or before ................, .....%, and
if redeemed] during the 12-month period beginning ........ of the years
indicated,
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
YEAR PRICE YEAR PRICE
---- --------- ---- ----------
<S> <C> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption [if applicable, insert -- (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest instalments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.] [If applicable, insert -- The Securities of this series are subject
to redemption upon not less than... days' notice by mail, (1) on ........
in any year commencing with the year .... and ending with the year .... through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time [on or
after ..........], as a whole or in part, at the election of the Company, at the
Redemption Prices for redemption otherwise than through operation of the sinking
fund (expressed as percentages of the
<PAGE> 26
18
203
principal amount) set forth in the table below: If redeemed during the
12-month period beginning .............. of the years indicated,
<TABLE>
<CAPTION>
REDEMPTION PRICE
REDEMPTION PRICE FOR REDEMPTION
FOR REDEMPTION OTHERWISE
THROUGH OPERATION THAN THROUGH
OF THE OPERATION OF THE
YEAR SINKING FUND SINKING FUND
---- ----------------- ----------------
<S> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to ....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[Notwithstanding the foregoing, the Company may not, prior to ...... ....,
redeem any Securities of this series as contemplated by [Clause (2) of] the
preceding paragraph as a part of, or in anticipation of, any refunding operation
by the application, directly or indirectly, of moneys borrowed having an
interest cost to the Company (calculated in accordance with generally accepted
financial practice) of less than ....% per annum.]
[The sinking fund for this series provides for the redemption on .....
....... in each year beginning with the year .... and ending with the year ....
of [not less than] $............ [("mandatory sinking fund") and not more than
$............] aggregate principal amount of Securities of this series.
[Securities of this series acquired or redeemed by the Company otherwise than
through [mandatory] sinking fund payments may be credited against subsequent
[mandatory] sinking fund payments otherwise required to be made -- in the
inverse order in which they become due.]
<PAGE> 27
19
203
In the event of redemption of this Security in part only, a new Security or
Securities of this series for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
[If the Security is not an Original Issue Discount Security, -- If an
Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, -- If an Event of
Default with respect to Securities of this series shall occur and be continuing,
an amount of principal of the Securities of this series may be declared due and
payable in the manner and with the effect provided in the Indenture. Such amount
shall be equal to -- insert formula for determining the amount. Upon payment (i)
of the amount of principal so declared due and payable and (ii) of interest on
any overdue principal and overdue interest (in each case to the extent that the
payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of the principal of and interest, if any,
on the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
<PAGE> 28
20
203
The Indenture permits defeasance at any time of (a) the entire indebtedness
on this Security and (b) certain restrictive covenants and certain Events of
Default upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Security.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of (and premium, if any)
and interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $........ and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of trans-
fer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
<PAGE> 29
21
204,301
SECTION 204. Form of Trustee's Certificate of Authentication.
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK
as Trustee
By...................................
Authorized Signatory
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall distinguish
the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Sections 304, 305, 306, 906 or 1107);
(3) the date or dates on which the principal of the Securities of the
series is payable;
(4) the rate or rates at which the Securities of the series shall bear
interest, if any, or the formula or provision pursuant to which such rate
or rates are determined, the date or dates from which such interest shall
accrue, the Interest Payment Dates on which such
<PAGE> 30
22
301
interest shall be payable and the Regular Record Date for the interest
payable on any Interest Payment Date;
(5) the place or places where the principal of (and premium, if any)
and interest on Securities of the series shall be payable;
(6) the period or periods within which, the price or prices at which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company;
(7) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(9) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section
502;
(10) if other than the currency of the United States of America, the
currency or currencies, including composite currencies, in which payment of
the principal of (and premium, if any) and interest on the Securities of
the series shall be payable, and the manner in which any such currencies
shall be valued against other currencies in which any other Securities
shall be payable;
(11) if the amount of payments of principal of (and premium, if any)
or interest on the Securities of the series may be determined with
reference to an index, the manner in which such amounts shall be
determined;
(12) whether the Securities of the series shall be issued in whole or
in part in the form of one or more Global Securities and, in such case, the
Depositary for such Global Security or Securities, which Depositary shall
be, if then required by applicable law or regulation, a clearing agency
registered under the Securities Exchange Act of 1934, as amended;
<PAGE> 31
23
301,302
(13) any Events of Default and covenants of the Company with respect
to the Securities of such series, whether or not such Events of Default or
covenants are consistent with Events of Default or covenants set forth
herein; and
(14) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
Securities of any one series may be issued at various times, may be
reopened for the issuance of additional Securities of such series and shall be
substantially identical, except as may otherwise be provided in or pursuant to
such Board Resolution and set forth in such Officers' Certificate or in any such
indenture supplemental hereto.
At the election of the Company, payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, an Officers' Certificate shall certify that such action
shall have been duly taken or a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company
and, in either case, delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication and delivery of
such Securities. If all of the Securities of any series the forms or terms of
which are established by action taken pursuant to a Board Resolution are not
issued at one time, it shall not be necessary (notwithstanding any provision of
Section 201 or this Section) to deliver a record of or Officers' Certificate
certifying such action at the time of issuance of each Security of such series,
but an appropriate record of such action or such Officers' Certificate shall be
delivered at or prior to the time of issuance of the first Securities of such
series.
SECTION 302. Denominations.
The Securities of each series shall be issuable in registered form without
coupons in such denominations as shall be specified as contemplated by Section
301. In the absence of any such provisions with respect to the Securities of any
series, the Securities of such series shall be issuable in denominations of
$1,000 and any integral multiple thereof.
<PAGE> 32
24
303
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its President or one of its Vice Presidents, under its corporate
seal reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If all
the Securities of any series are not to be issued at one time, such Company
Order may establish procedures for completion of the forms and determination of
the terms of such Securities and authentication and delivery thereof from time
to time; such procedures may include electronic transmission of instructions as
to such completion, determination, authentication and delivery. If the forms or
terms of the Securities of the series have been established in or pursuant to
one or more Board Resolutions as permitted by Sections 201 and 301, in
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive such documents as it may reasonably request. The Trustee
shall also be entitled to receive, and (subject to Section 601) shall be fully
protected in relying upon, an Opinion of Counsel stating,
(a) if the forms of such Securities has been established in or
pursuant to a Board Resolution as permitted by Section 201, that each such
form has been established or will, when established in compliance with the
Company Order, be established in conformity with the provisions of this
Indenture;
(b) if the terms of such Securities have been established in or
pursuant to a Board Resolution as permitted by Section 301, that such terms
have been established or will, when established in compliance
<PAGE> 33
25
303,304
with the Company Order, be established in conformity with the provisions of
this Indenture; and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, moratorium, reorganization
and other laws of general applicability relating to or affecting the
enforcement of creditors' rights, to general equity principles and to such
other matters as shall be specified in such Opinion of Counsel.
Such Opinion of Counsel shall also cover such other matters as the Trustee may
reasonably request. If such form or terms have been so established, the Trustee
shall not be required to authenticate such Securities if the issue of such
Securities pursuant to this Indenture will affect the Trustee's own rights,
duties or immunities under the Securities and this Indenture or otherwise in a
manner which is not reasonably acceptable to the Trustee. If all the Securities
of any series are not to be issued at one time, it shall not be necessary to
deliver an Opinion of Counsel at the time of issuance of each Security, but an
Opinion of Counsel, with appropriate modifications, may instead be delivered at
or prior to the time of the first issuance of Securities of such series.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions,
<PAGE> 34
26
304,305
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of the same series of authorized denominations. Until so
exchanged the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept in the office or agency of the Company
in the Borough of Manhattan, the City of New York required by Section 1002 a
register (the register maintained in such office and in any other office or
agency of the Company in a Place of Payment being herein sometimes collectively
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. Bank of Montreal Trust Company is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any series
at the office or agency in a Place of Payment for that series, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series and tenor, of any authorized denominations and of a like aggregate
principal amount.
At the option of the Holder, Securities of any series may be exchanged for
other Securities of the same series and tenor, of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and
<PAGE> 35
27
305
the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange Securities of any series during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 1103 and ending
at the close of business on the day of such mailing, or (ii) to register the
transfer of or exchange any Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part.
Notwithstanding any other provisions of this Section, unless and until it
is exchanged in whole or in part for Securities in definitive registered form, a
Global Security representing all or a portion of the Securities of a series may
not be transferred, except as a whole by the Depositary for such series to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor Depositary for such series or a nominee of such successor
Depositary. The Trustee and the Company shall treat the Depositary or its
nominee as the Holder of Global Securities for all purposes hereof.
If at any time the Depositary for any Securities of a series represented by
one or more Global Securities notifies the Company that it is unwilling or
unable to continue as Depositary for such Securities or if at any time the
<PAGE> 36
28
305
Depositary for such Securities shall no longer be eligible under Section 101,
the Company shall appoint a successor Depositary with respect to such
Securities. If a successor Depositary for such Securities is not appointed by
the Company within 90 days after the Company receives such notice or becomes
aware of such ineligibility, the Company's election pursuant to Section 301 that
such Securities be represented by one or more Global Securities shall no longer
be effective and the Company will execute, and the Trustee, upon receipt of a
Company Order for the authentication and delivery of definitive Securities of
such series, will authenticate and deliver, Securities of such series in
definitive registered form without coupons, in any authorized denominations, in
an aggregate principal amount equal to the principal amount of the Global
Security or Securities representing such Securities in exchange for such Global
Security or Securities.
The Company may at any time and in its sole discretion determine that the
Securities of any series issued in the form of one or more Global Securities
shall no longer be represented by a Global Security or Securities. In such event
the Company will execute, and the Trustee, upon receipt of a Company Order for
the authentication and delivery of the definitive Securities of such series,
will authenticate and deliver, Securities of such series in definitive
registered form without coupons, in any authorized denominations, in an
aggregate principal amount equal to the principal amount of the Global Security
or Securities representing such Securities in exchange for such Global Security
or Securities.
If specified by the Company pursuant to Section 301 with respect to
Securities represented by a Global Security, the Depositary for such Global
Security may surrender such Global Security in exchange in whole or in part for
Securities of the same series and tenor in definitive registered form on such
terms as are acceptable to the Company and such Depositary. Thereupon, the
Company shall execute, and the Trustee shall authenticate and deliver, without
service charge,
(1) to the Person specified by such Depositary a new Security or Securities
of the same series and term, of any authorized denominations as requested by
such Person, in an aggregate principal amount equal to and in exchange for such
Person's beneficial interest in the Global Security; and
(2) to such Depositary a new Global Security in a denomination equal to the
difference, if any, between the principal amount of the surrendered Global
Security and the aggregate principal amount of Securities authenticated and
delivered pursuant to clause (1) above.
<PAGE> 37
29
305,306
Every Person who takes or holds any beneficial interest in a Global
Security agrees that:
(a) the Company and the Trustee may deal with the Depositary as sole
owner of the Global Security and as the authorized representative of such
Person;
(b) such Person's rights in the Global Security shall be exercised
only through the Depositary and shall be limited to those established by
law and agreement between such Person and the Depositary and/or direct and
indirect participants of the Depositary; and
(c) the Depositary and its participants make book-entry transfers of
beneficial ownership among, and receive and transmit distributions of
principal and interest on the Global Securities to, such Persons in
accordance with their own procedures.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
<PAGE> 38
30
306,307
Every new Security of any series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon, the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days
<PAGE> 39
31
307,308
prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and,
in the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder of
Securities of such series at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of (and premium, if any) and
(subject to Section 307) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
<PAGE> 40
32
309,310,401
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Securities so delivered shall be promptly cancelled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Securities held by the Trustee shall be
disposed of in accordance with its customary practices.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for Securities
of any series, interest on the Securities of each series shall be computed on
the basis of a year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
<PAGE> 41
33
401,402
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust for
such purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for principal (and premium, if any) and interest to the
date of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may
be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to Subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the
<PAGE> 42
34
402,501
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been deposited
with the Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 60 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) default in the payment of any sinking fund payments, when and as
due by the terms of a Security of that series, and continuance of such
default for a period of 60 days; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with or which has expressly been included in this
Indenture solely for the benefit of series of Securities other than that
series), and continuance of such default or breach for a period of 90 days
after there has been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
or
(5) default by the Company in the payment of any principal of any
Funded Debt of the Company outstanding in an aggregate principal amount in
excess of $10,000,000 as and when the same shall become
<PAGE> 43
35
501
due and payable either at maturity, upon redemption, by declaration or
otherwise, the effect of which default is to cause such Funded Debt to
become, or to be declared, due prior to its stated maturity unless such
default shall be cured, by payment or otherwise, within 30 days after the
receipt by the Company of written notice of such default from the Trustee
or from the Holders of at least 5% in principal amount of the Outstanding
Securities of that series; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 90
consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in
furtherance of any such action; or
(8) any other Event of Default provided with respect to Securities of
that series.
<PAGE> 44
36
502
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount (or, if the Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all of the Securities
of that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such principal amount (or specified amount) shall become immediately due and
payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate or rates prescribed therefor in such
Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
<PAGE> 45
37
502,503
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any installment of interest on
any Security or any deposit of any sinking fund payment when such becomes
due and payable and such default continues for a period of 60 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
or rates prescribed therefor in such Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
<PAGE> 46
38
504,505
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of
<PAGE> 47
39
505,506,507
any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
<PAGE> 48
40
507,508,509
(3) such Holder or Holders have offered to the Trustee reason-
able indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and (subject to Section 307)
interest on such Security on the Stated Maturity or Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
<PAGE> 49
41
510,511,512,513
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities of
such series, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
<PAGE> 50
42
513,514,515
(1) in the payment of the principal of (or premium, if any) or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant, other
than the Trustee, in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Securities of any series, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Security on or after the
Stated Maturity or Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or
<PAGE> 51
43
515,601
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
<PAGE> 52
44
601,602
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding
Securities of any series, determined as provided in Section 512, relating
to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture with respect to the Securities of such
series; and
(4) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit by mail to all
Holders of Securities of such series, as their names and addresses appear in the
Security Register, notice of such default hereunder known to the Trustee, unless
such default shall have been cured or waived; provided, however, that, except in
the case of a default in the payment of the principal of (or premium, if any) or
interest on any Security of such series or in the payment of any sinking fund
instalment with respect to Securities of such series, the Trustee shall be
protected in withholding such notice if and so long as a trust committee of
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders of Securities of such series;
and provided, further, that in the case of any default of the character
specified in Section 501(4) with respect to Securities of such series, no such
notice to Holders shall be given until at least 60 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default with respect to Securities of such series.
<PAGE> 53
45
603
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) shall be entitled to receive
and may, in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
<PAGE> 54
46
603,604,605,606
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder and shall not be responsible for the supervision of officers
and employees of such agents or attorneys; and
(h) the Trustee shall be entitled to the rights and protections
afforded to the Trustee pursuant to this Article Six in acting as a Paying
Agent or Security Registrar hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. The Trustee
or any Authenticating Agent shall not be accountable for the use or application
by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 310(b) and 311 of the Trust Indenture Act and Section 609, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such
other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
<PAGE> 55
47
607,608
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or wilful
misconduct; and
(3) to indemnify each of the Trustee and its officers, directors,
agents and employees for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or wilful misconduct on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company under
this Section the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any) or interest on
Securities.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(6) or Section 501(7), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services of the Trustee are intended to constitute expenses
of administration under any applicable Federal or state bankruptcy, insolvency
or other similar law.
SECTION 608. Disqualification; Conflicting Interests.
Reference is made to Section 310(b) of the Trust Indenture Act. There shall
be excluded from the operation of Section 310(b)(1) of the Trust
<PAGE> 56
48
608,609,610
Indenture Act this Indenture with respect to the Securities of more than one
series.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, subject to supervision or examination by Federal or
State authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. The
Trustee shall not be an obligor upon the Securities or an Affiliate thereof. If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
<PAGE> 57
49
610
(d) If at any time:
(1) the Trustee shall fail to comply with Section 310(b) of the Trust
Indenture Act after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee
<PAGE> 58
50
610,611
with respect to the Securities of any series shall have been so appointed by the
Company or the Holders and accepted appointment in the manner required by
Section 611, any Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the
<PAGE> 59
51
611,612
appointment of such successor Trustee relates, (2) if the retiring Trustee is
not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article and the Trust Indenture Act.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under
<PAGE> 60
52
612,613,614
this Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
Reference is made to Section 311 of the Trust Indenture Act. For purposes
of Section 311(b),
(1) the term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(2) the term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation.
SECTION 614. Appointment of Authenticating Agent.
At any time when any of the Securities remain Outstanding the Trustee may
appoint an Authenticating Agent or Agents with respect to one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon exchange, registration of
transfer or partial redemption thereof or pursuant to Section 306, and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
<PAGE> 61
53
614
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if
<PAGE> 62
54
614,701
originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 607.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK
As Trustee
By...................................
As Authenticating Agent
By...................................
Authorized Signatory
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
<PAGE> 63
55
701,702
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as "applicants") apply in
writing to the Trustee, and furnish to the Trustee reasonable proof that each
such applicant has owned a Security for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their rights
under this Indenture or under the Securities and is accompanied by a copy of the
form of proxy or other communication which such applicants propose to transmit,
then the Trustee shall, within five business days after the receipt of such
application, at its election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 702(a), or
(ii) inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time
by the Trustee in accordance with Section 702(a), and as to the approximate
cost of mailing to such Holders the form of proxy or other communication,
if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder whose name and address appear in the information preserved
at the time by the Trustee in accordance with Section 702(a) a copy of the form
of proxy or other communication which is specified in such request, with
reasonable promptness after a tender to the Trustee of the material to be mailed
and of payment, or provision for the payment, of the reasonable expenses of
mailing, unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the best interest of the Holders
or would be in violation of applicable law.
<PAGE> 64
56
702,703,704
Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for hearing,
that all the objections so sustained have been met and shall enter an order so
declaring, the Trustee shall mail copies of such material to all such Holders
with reasonable promptness after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any obligation or duty to
such applicants respecting their application.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with Section 702(b), regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 702(b).
SECTION 703. Reports by Trustee.
Any Trustee's report required pursuant to Section 313(a) of the Trust
Indenture Act shall be dated as of August 1, and shall be transmitted within 60
days after August 1 of each year, commencing with the year 1998, by mail to all
Holders, as their names and addresses appear in the Security Register. A copy of
each such report shall, at the time of such transmission to Holders, be filed by
the Trustee with each stock exchange upon which any Securities are listed, with
the Commission and with the Company. The Company will notify the Trustee when
any Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee, within 15 days after the Company
is required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports which the Company may be
required to file with the Commission pursuant to
<PAGE> 65
57
704,801,802
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended,
or pursuant to Section 314 of the Trust Indenture Act.
ARTICLE EIGHT
CONSOLIDATION, MERGER AND SALE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person unless:
(1) the person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an
entirety shall be a corporation, partnership or trust, shall be organized
and existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of and interest on all the Securities and the performance of
every covenant of this Indenture on the part of the Company to be performed
or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with or merger of the Company into,
any other person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
801, the successor person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or
<PAGE> 66
58
802,901
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor person had been named as the Company herein, and thereafter,
except in the case of a lease to another Person, the predecessor person shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision; or
(6) to secure the Securities of any series pursuant to the
requirements of Section 1005 or otherwise; or
<PAGE> 67
59
901,902
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611(b); or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not adversely affect the interests of the
Holders of Securities of any series in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any instalment
of principal of or interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
502, or change any Place of Payment where, or the coin or currency in
which, any Security or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or
<PAGE> 68
60
902,903
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby,
provided, however, that this clause shall not be deemed to require the
consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section, or the deletion of this
proviso, in accordance with the requirements of Sections 611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
<PAGE> 69
61
904,905,906,1001,1002
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of that series in accordance with the
terms of the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New York
and in each other Place of Payment for any series of Securities an office or
agency where Securities of that series may be presented or surrendered for
payment, where Securities of that series may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities of that series
<PAGE> 70
62
1002,1003
and this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in each Place of Payment for Securities of any series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, prior to each due date of the principal of (and premium, if
any) or interest on any Securities of that series, deposit with a Paying Agent a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act. For purposes of this Section, should a due date for principal
of (and premium, if any), interest on, or sinking fund payment with respect to
any series of Securities not be on a Business Day, such payment shall be due on
the next Business Day.
<PAGE> 71
63
1003
The Company will cause each Paying Agent for any series of Securities other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of that series) in the making of any
payment of principal (and premium, if any) or interest on the Securities of
that series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Subject to any applicable escheat or abandoned property laws, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of (and premium, if any) or interest on
any Security of any series and remaining unclaimed for one year after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan,
<PAGE> 72
64
1003,1004,1005
The City of New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Corporate Existence
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. Limitation on Liens.
The Company will not itself, and will not permit any Restricted Subsidiary
to, incur, issue, assume or guarantee any indebtedness for money borrowed (all
such indebtedness for money borrowed being hereinafter in this Article called
"Debt"), secured by a Mortgage on any Principal Property or on any shares of
stock or Indebtedness of any Restricted Subsidiary, without effectively
providing that the Securities of any series (together with, if the Company shall
so determine, any other indebtedness of the Company or such Restricted
Subsidiary which is not subordinate in right of payment to the prior payment in
full of the Securities of any series) shall be secured equally and ratably with
(or prior to) such secured Debt, so long as such secured Debt shall be so
secured, unless, after giving effect thereto, the aggregate amount of all Debt
so secured would not exceed 10% of Consolidated Net Tangible Assets as of a date
within 150 days prior to such determination; provided, however, that this
Section shall not apply to, and there shall be excluded from secured Debt in any
computation under this Section, Debt secured by:
(1) Mortgages existing at the date of this Indenture;
(2) Mortgages on property of, or on any shares of stock or
Indebtedness of, any corporation existing at the time such corporation
becomes a Restricted Subsidiary;
(3) Mortgages in favor of the Company or any Restricted Subsidiary;
<PAGE> 73
65
1005
(4) Mortgages on property, shares of stock or Indebtedness existing at
the time of acquisition thereof (including acquisition through merger,
consolidation or other reorganization) or to secure the payment of all or
any part of the purchase price thereof or construction thereon or to secure
any Debt incurred prior to, at the time of, or within 180 days after the
later of the acquisition, the completion of construction or the
commencement of full operation of such property or within 180 days after
the acquisition of such shares or Indebtedness for the purpose of financing
all or any part of the purchase price thereof or construction thereon, it
being understood that if a commitment for such financing is obtained prior
to or within such 180-day period, the applicable Mortgage shall be deemed
to be included in this Clause (4) whether or not such Mortgage is created
within such 180-day period;
(5) Mortgages on property owned or leased by the Company or a
Restricted Subsidiary in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political
subdivision of the United States of America or any State thereof, or in
favor of any other country or any political subdivision thereof, or in
favor of holders of securities issued by any such entity, pursuant to any
contract or statute (including without limitation, mortgages or easements
on property of the Company or any Restricted Subsidiary related to the
financing of such property pursuant to Section 103 of the Internal Revenue
Code of 1954, as amended or any successor section thereto);
(6) Mortgages to secure partial, progress, advance or other payments
or any Debt incurred for the purpose of financing all or any part of the
purchase price or cost of construction, development or repair, alteration
or improvement of the property subject to such Mortgage if the commitment
for the financing is obtained not later than one year after the latter of
the completion of or the placing into operation (exclusive of test and
start-up periods) of such constructed, developed, repaired, altered or
improved property;
(7) Mortgages on oil, gas, coal or other minerals in place or on
geothermal resources in place, or on related leasehold or other property
interests, which are incurred to finance development, production or
acquisition costs (including but not limited to Mortgages securing advance
sale obligations);
<PAGE> 74
66
1005,1006
(8) Mortgages on equipment used or usable for drilling, servicing or
operation of oil, gas, coal or other mineral properties or of geothermal
properties;
(9) Mortgages arising in connection with contracts or subcontracts
with, or made at the request of, the United States of America, any State
thereof or any department, agency or instrumentality of the United States
or any State thereof; and
(10) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Mortgage referred
to in the foregoing Clauses (1) to (9) of this Section 1005, inclusive;
provided, however, that such extension, renewal or replacement Mortgage
shall be limited to all or a part of the same property, shares of stock or
Restricted Subsidiary Indebtedness that secured the Mortgage extended,
renewed or replaced (plus improvements on such property).
The following transactions shall be deemed to create Debt secured by a
Mortgage:
(i) the sale or other transfer of oil, gas, coal or other minerals in
place for a period of time until, or in an amount such that, the transferee
will realize therefrom a specified amount of money (however determined) or
a specified amount of oil, gas, coal or other minerals, or the sale or
other transfer of any other interest in property of the character commonly
referred to as an oil, gas, coal or other mineral payment or a production
payment; and
(ii) the sale or other transfer by the Company or a Restricted
Subsidiary of properties to a partnership, joint venture or other entity
whereby the Company or such Restricted Subsidiary would retain partial
ownership of such properties.
SECTION 1006. Statement by Officers as to Default.
Annually, within 120 days after the close of each fiscal year beginning
with the fiscal year ending December 31, 1997, the Company will deliver to the
Trustee a brief certificate (which need not include the statements set forth in
Section 102) from the principal executive officer, principal financial officer
or principal accounting officer of the Company as to his or her knowledge of the
Company's compliance (without regard to any period of
<PAGE> 75
67
1006,1101,1102,1103
grace or requirement of notice provided herein) with all conditions and
covenants under the Indenture.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 301 for Securities of any series) in
accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
a Board Resolution. In case of any redemption at the election of the Company of
less than all the Securities of any series, the Company shall, at least five
Business Days prior to the last date for the giving of notice of such redemption
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date and of the principal amount of Securities of
such series to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 40 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities
<PAGE> 76
68
1103,1104
selected for partial redemption, the principal amount thereof to be redeemed. If
the Securities of any series to be redeemed consist of Securities having
different dates on which the principal is payable or different rates of
interest, or different methods by which interest may be determined or have any
other different tenor or terms, then the Company may, by written notice to the
Trustee, direct that the Securities of such series to be redeemed shall be
selected from among the groups of such Securities having specified tenor or
terms and the Trustee shall thereafter select the particular Securities to be
redeemed in the manner set forth in the preceding paragraph from among the group
of such Securities so specified.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 15 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
<PAGE> 77
69
1104,1105,1106,1107
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that instalments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate prescribed therefor in the
Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the
<PAGE> 78
70
1107,1201,1202
same series and tenor, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 1202. Each sinking fund payment shall be applied to the redemption of
Securities of any series as provided for by the terms of Securities of such
series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and (2) may apply as a credit Securities
of a series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, in each
case in satisfaction of all or any part of any sinking fund payment with respect
to the Securities of such series required to be made pursuant to the terms of
such Securities as provided for by the terms of such Series; provided that such
Securities have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the Redemption Price
specified in such Securities for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced accordingly.
<PAGE> 79
71
1203,1301,1302
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202 and will also deliver to the Trustee any Securities to
be so delivered. Not less than 45 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
DEFEASANCE
SECTION 1301. Applicability of Article; Company's Option to Effect
Defeasance.
The Company may at its option by or pursuant to a Board Resolution, at any
time, with respect to the Securities of a series, elect to have Section 1302 be
applied to the Outstanding Securities of such series upon compliance with the
conditions set forth below in this Article Thirteen.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise of the above option applicable to this Section,
the Company shall be deemed to have been discharged from its obligations with
respect to the Outstanding Securities of such series on the date the conditions
set forth below are satisfied (hereinafter, "defeasance"). For this purpose,
such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Securities of
such series and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the
<PAGE> 80
72
1302,1303
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Securities of such series
to receive, solely from the trust fund described in Section 1304 and as more
fully set forth in such Section, payments in respect of the principal of (and
premium, if any) and interest on such Securities when such payments are due, (B)
the Company's obligations with respect to such Securities under Sections 304,
305, 306, 1002 and 1003, (C) the rights, powers, trusts, duties, and immunities
of the Trustee hereunder and (D) this Article Thirteen.
SECTION 1303. Conditions to Defeasance.
The following shall be the conditions to application of Section 1302 to the
Outstanding Securities of such series:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 609 who shall agree to comply with the provisions of this
Article Thirteen applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, (i) the
principal of (and premium, if any, on) and each installment of principal of
(and premium, if any) and interest on the Outstanding Securities of such
series on the Stated Maturity of such principal or installment of principal
or interest and (ii) any mandatory sinking fund payments or analogous
payments applicable to the Outstanding Securities of such series on the day
on which such payments are due and payable in accordance with the terms of
this Indenture and of such Securities. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the United
States of America for the payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America,
which, in either case, are not callable or redeemable
<PAGE> 81
73
1303
at the option of the issuer thereof, and shall also include a depository
receipt issued by a bank (as defined in Section 3(a)(2) of the Securities
Act of 1933, as amended) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or
the specific payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
(2) No Event of Default or event which with notice or lapse of time or
both would become an Event of Default with respect to the Securities of
such series shall have occurred and be continuing on the date of such
deposit.
(3) Such defeasance shall not cause the Trustee for the Securities of
such series to have a conflicting interest as defined in Section 310(b) of
the Trust Indenture Act with respect to any securities of the Company.
(4) Such defeasance shall not result in a breach or violation of, or
constitute a default under this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound.
(5) Such defeasance shall not cause any Securities of such series then
listed on any registered national securities exchange under the Securities
Exchange Act of 1934, as amended, to be delisted.
(6) Such defeasance shall be effected in compliance with any
additional terms, conditions or limitations which may be imposed on the
Company in connection therewith pursuant to Section 301.
(7) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for in this Indenture relating to the defeasance under
Section 1302 have been complied with.
Notwithstanding the foregoing, if an Event of Default specified in
Subsection 501(5) or 501(6), or an event which with lapse of time would become
such an Event of Default, shall occur during the period ending on the 91st day
after the date of the deposit referred to in Clause (1) or, if
<PAGE> 82
74
1303,1304
longer, ending on the day following the expiration of the longest preference
period applicable to the Company in respect of such deposit, then, effective
upon such occurrence, the defeasance and such deposit shall be rescinded and
annulled, and the Company, the Trustee and the Holders of the Securities of such
series shall be restored to their former positions.
SECTION 1304. Deposited Money and U.S. Government Obligations to be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee (or other qualifying trustee -- collectively, for purposes of this
Section 1304, the "Trustee") pursuant to Section 1303 in respect of the
Outstanding Securities of such series shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent), to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1303 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities of such series.
Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1303 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counter-parts
shall together constitute but one and the same instrument.
<PAGE> 83
75
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
ANADARKO PETROLEUM CORPORATION
[SEAL]
By
----------------------------------
Senior Vice President, Finance
ATTEST:
- ------------------------------------
Corporate Secretary
HARRIS TRUST AND SAVINGS BANK
as Trustee
[SEAL]
By
------------------------------------
ATTEST:
- ------------------------------------
<PAGE> 84
76
<TABLE>
<S> <C>
STATE OF TEXAS )
COUNTY OF HARRIS )
</TABLE>
On the day of , before me personally
came , to me known, who, being by me duly sworn, did depose
and say that he is of ANADARKO PETROLEUM
CORPORATION, one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.
-------------------------------------
NOTARY
<TABLE>
<S> <C>
STATE OF NEW YORK )
COUNTY OF NEW YORK )
</TABLE>
On the day of , before me personally came
, to me known, who, being by me duly sworn, did depose and say
that such person is a of HARRIS BANK AND SAVINGS BANK, one
of the corporations described in and which executed the foregoing instrument;
that such person knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that such person signed his name
thereto by like authority.
-------------------------------------
NOTARY
<PAGE> 85
87
101 101
101 101
101 101
101 101
102, 103 103, 104
104, 105 105, 106, 107, 108
109, 110, 111, 112, 113 201, 202
202 202, 203
203 203
203 203
203, 204, 301 301
301, 302, 303 303, 304
304, 305 305, 306
306, 307 307
307, 308, 309, 310, 401 401
401, 402, 501 501
501, 502 502, 503
503, 504 504, 505, 506
506, 507 508, 509, 510, 511
511, 512, 513, 514 514, 515, 601
601 601, 602, 603
603, 604 605, 606, 607
607, 608 608
608 608
608 608
608, 609, 610 610
610, 611 611, 612
612, 613 613
13041304
<PAGE> 86
88
613 613
613, 614 614
614 701, 702
702, 703 703
703, 704 704, 801, 802
802, 803 803, 804
901 901, 902
902, 903, 904 905, 906, 1001, 1002
1002, 1003 1003, 1004
1004 1004
1004 1004
1004 1004, 1005
1005, 1006 1006
1007, 1008, 1009 1009, 1010
1010, 1101, 1102 1103, 1104
1104, 1105, 1106 1107, 1201, 1202
1202, 1203, 1301 1301, 1302, 1303
1303, 1304 1304
1304, 1305 1305
13041304
<PAGE> 1
EXHIBIT 10(b)(ii)
AMENDMENT TO
ANADARKO PETROLEUM CORPORATION
DIRECTOR DEFERRED COMPENSATION PLAN
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Corporation") has
heretofore adopted the ANADARKO PETROLEUM CORPORATION DIRECTOR DEFERRED
COMPENSATION PLAN which was restated and amended on April 1, 1987 (the
"Plan"); and
WHEREAS, the Corporation desires to amend the Plan:
NOW, THEREFORE, the Plan shall be amended, effective as of January 29,
1998, as follows:
1. Section 11 shall be replaced in its entirety by the following:
11. Termination as to Prior Compensation Deferrals: The
Corporation may terminate the Plan at any time prior to a "Change of Control"
(as hereinafter defined) with respect to Compensation deferrals made prior to
the Corporation's termination of the Plan, but only if the federal tax laws
change or are construed in such a manner as to materially adversely affect the
Corporation's after-tax net cost in providing the benefits due the Director
under the Plan. If the Plan is terminated pursuant to this Section 11, the
Corporation agrees to pay each Director to whom annual installment payments
pursuant to his Agreement have not commenced, in lieu of amounts otherwise
payable and not theretofore paid, the sum or sums actually deferred with
interest thereon at the rate per annum specified in the Agreement compounded
annually from the Commencement Date through date of payment, less an amount
equal to the benefits paid prior to such termination with interest thereon at
the same rate, compounded annually from the date of such prior payment through
the date of payment of the Plan termination benefit pursuant to this Section
11. Such payment shall be made the January following the date of Plan
termination. If the Plan is terminated pursuant to this Section 11, the
Corporation agrees to continue to make the installment payments to each
Director to whom annual installment payments under his Agreement have
commenced. The Corporation may not terminate the Plan pursuant to this Section
11 at any time after the occurrence of a "Change of Control".
For purposes of this Section 11, a "Change of Control" shall be deemed
to have taken place if any of the following occur:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding Corporation Voting
Securities"); provided, however, that
<PAGE> 2
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Corporation, (ii) any acquisition by the Corporation, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation or (iv) any
acquisition pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (a) of this Section 11; or
(b) Individuals who, as of January 29, 1998, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to January 29, 1998, whose election, or nomination for election by
the Corporation's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(c) Consummation by the Corporation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Corporation or the acquisition of assets of another entity (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Corporation Common
Stock and Outstanding Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Corporation or all
or substantially all of the Corporation's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities, as the case may be,
(ii) no Person (excluding any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Business Combination)
beneficially own, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(d) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
-2-
<PAGE> 3
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed this 29th day of January, 1998.
ANADARKO PETROLEUM CORPORATION
By:
---------------------------------------
Charles G. Manley
Senior Vice President, Administration
-3-
<PAGE> 1
EXHIBIT 10(b)(iv)
FIRST AMENDMENT TO
DIRECTOR DEFERRED COMPENSATION AGREEMENT
1987, 1988, 1989 and 1990 PLAN YEAR
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Corporation") has
heretofore adopted the DIRECTOR DEFERRED COMPENSATION PLAN as amended on
January 29, 1998 (the "Plan"); and
WHEREAS, the Corporation has entered into the DIRECTOR DEFERRED
COMPENSATION AGREEMENTS for the 1987, 1988, 1989 and 1990 Plan Years (the
"Agreements"); and
WHEREAS, the Corporation desires to amend each of the Agreements:
NOW, THEREFORE, each of the Agreements shall be amended, effective as
of January 29, 1998, as follows:
1. Item VII shall be replaced in its entirety by the following:
"VII.
TERMINATION FOLLOWING
A CHANGE OF CONTROL
If Director ceases to be a member of the Board of Directors of the
Corporation prior to attainment of age 55 and in connection with or after a
"Change of Control", as defined in the Plan, Director shall for purposes of
the Plan and this Agreement be considered to have remained a member of the
Board of Directors of the Corporation until the earlier of (i) his death, in
which case the Corporation shall pay to Director's beneficiary payments
pursuant to Item V above or (ii) the date Director would have been eligible for
benefit payments pursuant to Item III above, in which case Corporation shall
pay to Director payments pursuant to Item III above."
2. As amended hereby, each of the Agreements is specifically ratified and
reaffirmed.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused these presents to be
executed this 29th day of January, 1998.
ANADARKO PETROLEUM CORPORATION
By
-------------------------------------
Charles G. Manley
Senior Vice President, Administration
-------------------------------------
James L. Bryan
-2-
<PAGE> 1
EXHIBIT 10(b)(vii)
AMENDMENT TO
ANADARKO PETROLEUM CORPORATION
1988 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Company") has heretofore
adopted the ANADARKO PETROLEUM CORPORATION AMENDED AND RESTATED 1988 STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS (the "Plan"); and
WHEREAS, the Company desires to amend the Plan:
NOW, THEREFORE, the Plan shall be amended, effective as of January 1,
1997, as follows:
1. Article 7 shall be amended to delete the word "irrevocable".
2. As amended hereby, the Plan is specifically ratified and
reaffirmed.
ANADARKO PETROLEUM CORPORATION
<PAGE> 1
EXHIBIT 10(b)(viii)
SECOND AMENDMENT TO
ANADARKO PETROLEUM CORPORATION
1988 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Company") has heretofore
adopted the ANADARKO PETROLEUM CORPORATION AMENDED AND RESTATED 1988 STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS (the "Plan"); and
WHEREAS, the Company desires to amend the Plan:
NOW, THEREFORE, the Plan shall be amended, effective as of January 29,
1998, as follows:
1. Paragraph 8(c) shall be replaced in its entirety by the following:
"(c) If the Company recapitalizes or otherwise changes its
capital structure, thereafter upon any exercise of an Option theretofore
granted, the Eligible Director shall be entitled to purchase under such Option,
in lieu of the number of shares of Common Stock as to which such Option shall
then be exercisable, the number and class of shares of stock and securities or
other property to which the Eligible Director would have been entitled pursuant
to the terms of such recapitalization if, immediately prior to such
recapitalization, the Eligible Director had been holder of record of the number
of shares of Common Stock as to which such Option is then exercisable. Upon
the occurrence of a "Change of Control" (as defined below) as of a date
specified by the Committee (which for purposes of this Paragraph 8(c) in the
event of a Change of Control shall be the Committee as constituted prior to
such Change of Control) which is within thirty days of the occurrence of such
Change of Control, all outstanding Options which have been held for at least
six months, irrespective of whether such Options are then otherwise
exercisable, shall be surrendered to the Company by each Eligible Director
holding such Options and such Options shall thereupon be canceled by the
Company, and the Eligible Director shall receive a cash payment by the Company
in an amount equal to the number of shares of Common Stock subject to the
Option held by such Eligible Director multiplied by the difference between (x)
and (y) where (y) equals the purchase price per share of Common Stock covered
by the Option and (x) equals the fair market value of a share of the Common
Stock as reported on the NYSE on the date determined by the Board to be the
date of cancellation and surrender of such Options. In the event that the
consideration offered to stockholders of the Company in any transaction
described in this Paragraph 8(c) consists of anything other than cash, the
Board shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash. Notwithstanding the foregoing,
if any right granted pursuant to this
<PAGE> 2
Paragraph 8(c) would make a Change of Control transaction ineligible for
pooling-of-interests accounting under APB No. 16 that but for the nature of
such grant would otherwise be eligible for such accounting treatment, the
Committee shall have the ability to substitute for the cash payable pursuant to
such right Common Stock with a fair market value equal to the cash that would
otherwise be payable hereunder.
For purposes of the Plan, a "Change of Control" shall mean:
(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (1), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of January 29, 1998, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to January 29, 1998, whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets of
another entity (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of
<PAGE> 3
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(4) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be executed this 29th day of January, 1998.
ANADARKO PETROLEUM CORPORATION
By:
-------------------------------------
Charles G. Manley
Senior Vice President, Administration
<PAGE> 1
EXHIBIT 10(b)(xii)
FIRST AMENDMENT TO
RESTATEMENT OF THE
ANADARKO PETROLEUM CORPORATION
1987 STOCK OPTION PLAN
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Company") has heretofore
adopted the RESTATEMENT OF THE ANADARKO PETROLEUM CORPORATION 1987 STOCK OPTION
PLAN (the "Plan"); and
WHEREAS, the Company desires to amend the Plan:
NOW, THEREFORE, the Plan shall be amended, effective as of January 29,
1998, as follows:
1. Section 8 (c) shall be replaced in its entirety by the following:
"(c) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted the
Grantee shall be entitled to purchase under such Option, in lieu of the number
of shares of Common Stock as to which such Option shall then be exercisable,
the number and class of shares of stock and securities or other property to
which the Grantee would have been entitled pursuant to the terms of such
recapitalization if, immediately prior to such recapitalization, the Grantee
had been the holder of record of the number of shares of Common Stock as to
which such Option is then exercisable. Upon the occurrence of a "Change of
Control" (as defined below) as of a date specified by the Committee (which for
purposes of this Section 8(c) in the event of a Change of Control shall be the
Committee as constituted prior to such Change of Control) which is within
thirty days of the occurrence of such Change of Control, all (i) such
outstanding Options, irrespective of whether such Options are then otherwise
exercisable, shall be surrendered to the Company by each Grantee and such
Options shall thereupon be canceled by the Company, and the Grantee shall
receive a cash payment by the Company in an amount equal to the number of
shares of Common Stock subject to the Option held by such Grantee multiplied by
the difference between (x) and (y) where (y) equals the purchase price per
share of Common Stock covered by the Option and (x) equals the fair market
value of a share of the Common Stock on the date determined by the Committee to
be the date of cancellation and surrender of such Options and (ii) Forfeiture
Restrictions on all Restricted Stock shall lapse. In the event that the
consideration offered to stockholders of the Company in any transaction
described in this Section 8(c) consists of anything other than cash, the
Committee shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash. Notwithstanding the foregoing,
if any right granted pursuant to this Section 8(c) would
<PAGE> 2
make a Change of Control transaction ineligible for pooling-of-interests
accounting under APB No. 16 that but for the nature of such grant would
otherwise be eligible for such accounting treatment, the Committee shall have
the ability to substitute for the cash payable pursuant to such right Common
Stock with a fair market value equal to the cash that would otherwise be
payable hereunder.
For purposes of the Plan, a "Change of Control" shall mean:
(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (1), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of January 29, 1998, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to January 29, 1998, whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets of
another entity (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of
<PAGE> 3
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(4) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be executed this 29th day of January, 1998.
ANADARKO PETROLEUM CORPORATION
ATTEST:
By:
- -------------------------- -------------------------------------
Charles G. Manley
Senior Vice President, Administration
<PAGE> 1
EXHIBIT 10(b)(xv)
SECOND AMENDMENT TO
ANADARKO PETROLEUM CORPORATION
1993 STOCK INCENTIVE PLAN
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Company") has heretofore
adopted the ANADARKO PETROLEUM CORPORATION 1993 STOCK INCENTIVE PLAN as amended
(the "Plan"); and
WHEREAS, the Company desires to amend the Plan:
NOW, THEREFORE, the Plan shall be amended, effective as of January 29,
1998, as follows:
1. Section 8 shall be replaced in its entirety by the following:
"SECTION 8. CHANGE OF CONTROL.
(a) Notwithstanding any other provision of the Plan to the
contrary, in the event of a "Change of Control" (as defined below):
(i) Any Options and Stock Appreciation Rights outstanding as
of the date such Change of Control is determined to have
occurred, and which are not then exercisable and vested, shall
become fully exercisable and vested to the full extent of the
original grant.
(ii) The restrictions applicable to any Restricted Stock shall
lapse, and such Restricted Stock shall become free of all
restrictions and become fully vested and transferable to the
full extent of the original grant.
(b) In addition to the Committee's authority set forth in Section
7(c) and Section 8(a) of the Plan, in order to maintain the
Participants' rights in the event of any Change of Control, as
hereinafter defined, the Committee, as constituted before such Change
of Control, is hereby authorized, and has sole discretion, as to any
Award, either at the time such Award is made hereunder or any time
thereafter, to take any one or more of the following actions: (i)
provide for the purchase of any such Award, upon the Participant's
request, for an amount of cash equal to the amount that could have
been attained upon the exercise of such Award or realization of the
Participant's rights had such Award been currently exercisable or
payable; (ii) make such adjustment to any such Award then outstanding
as the Committee deems appropriate to reflect such Change of
<PAGE> 2
Control; or (iii) cause any such Award then outstanding to be
assumed, or new rights substituted therefor, by the acquiring or
surviving corporation after such Change of Control. The Committee
may, in its discretion, include such further provisions and
limitations in any Award Agreement as it may deem equitable and in the
best interests of the Company.
For purposes of the Plan, a "Change of Control" shall mean:
(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (1),
the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company
or (iv) any acquisition pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of
subsection (3) of this definition); or
(2) Individuals who, as of January 29, 1998, constitute
the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the
Board; provided, however, that any individual
becoming a director subsequent to January 29, 1998,
whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result
of an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of
another entity (a "Business Combination"), in each
case, unless, following such Business Combination,
(i) all or
<PAGE> 3
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting
securities entitled to vote generally in the election
of directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation which as a result
of such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their
ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the
case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or
such corporation resulting from such Business
Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business Combination or the
combined voting power of the then outstanding voting
securities of such corporation except to the extent
that such ownership existed prior to the Business
Combination and (iii) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members
of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(4) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be executed this 29h day of January, 1998.
ANADARKO PETROLEUM CORPORATION
ATTEST:
By:
- ----------------------- -------------------------------------
Charles G. Manley
Senior Vice President, Administration
<PAGE> 1
EXHIBIT 10(b)(xvii)
ANADARKO PETROLEUM CORPORATION
1993 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
THIS AGREEMENT, dated the________________________, between Anadarko
Petroleum Corporation, a Delaware corporation (the "Company") and First_Name~
Middle_Name~ Last_Name~ (the "Optionee").
W I T N E S S E T H:
1. Pursuant to the provisions of the 1993 Stock Incentive Plan
(the "Plan"), the Company hereby grants to the Optionee, subject to the terms
and conditions of the Plan, and subject further to the terms and conditions
herein set forth, the right and option ("Option") to purchase from the Company
at the purchase price of $xx.xxxx per share (said price being the fair market
value of the $0.10 par value common stock of the Company ("Common Stock") at
the date of grant of this Option) all or any part of an aggregate of
Shares_Granted~ shares of Common Stock (hereinafter a "Non- Qualified Stock
Option").
2. Subject to earlier expiration of this Option as herein
provided, the Non-Qualified Stock Option granted hereunder shall be exercisable
at any time and from time to time after the date of grant hereof, but such
Option(s) shall not be exercisable for more than a percentage of the aggregate
number of shares offered for purchase determined by the number of full years
from the date of grant hereof to the date of such exercise, in accordance with
the following schedule:
<TABLE>
<CAPTION>
Percentage of
Number of Full Years Shares Purchasable
-------------------- ------------------
<S> <C>
1 50%
2 50%
</TABLE>
This Option shall not be exercisable in any event after the expiration of ten
years (10) from the date of grant hereof.
No partial exercise of any Option may be for fewer than ten (10)
shares or the full number of shares as to which the Option is exercisable at
the time of such partial exercise, if less than ten (10) shares. The
Non-Qualified Stock Option may be exercised without regard to whether any
Option previously granted to the Optionee has been exercised in whole or in
part.
<PAGE> 2
3. The Options may not be exercised unless the Optionee is at the
time of such exercise in the employ of the Company and shall have been
continuously employed by the Company, or a subsidiary of the Company, since the
date of this Agreement; provided, however, that the Options shall be
exercisable following the termination of the Optionee's employment during the
term of the Options as follows:
(i) Retirement or Disability. If the Optionee shall cease to
be employed by the Company by reason of (a) retirement pursuant to a
pension or retirement plan of the Company, or of a subsidiary of the
Company, or (b) disability within the meaning of Section 22 (e)(3) of
the Internal Revenue Code of 1986, as amended (the "Code"), the
Optionee (or, in the event of Optionee's death, the Optionee's legal
representative) may, within a period of not more than thirty-six (36)
months after such cessation of employment, exercise the Option if and
to the extent it was exercisable on the date of such cessation. In no
event may the Options be exercised more than ten (10) years from the
date of grant.
(ii) Death of Optionee. Notwithstanding Paragraph 2, in the
event of the death of the Optionee while in the employ of the Company,
any Option granted to the Optionee shall vest and be immediately
exercisable with respect to all or any part of the shares as to which
such Option remains unexercised by the Optionee's legal representative
or other person or persons to whom the Optionee's rights under the
Option shall pass by the Optionee's will or the laws of descent and
distribution, but only before the expiration of ten (10) years from
the date of grant or of the twelve (12) month period after the
Optionee's death, whichever event first occurs.
(iii) Termination Without Cause. If the Optionee's employment
with the Company is terminated by the Company without cause, such
determination to be made solely at the discretion of the Committee (as
hereinafter defined), the Optionee (or, in the event of the Optionee's
death, the Optionee's legal representative) may, within a period of
not more than three (3) months after such cessation of employment,
exercise the Option if and to the extent it was exercisable at the
date of such cessation. In no event may the Options be exercised more
than ten (10) years from the date of grant.
4. To the extent that the right to purchase shares has accrued
hereunder, the Options, or any part thereof, may be exercised by giving written
notice of exercise to the Corporate Secretary of the Company specifying the
number of shares to be purchased and the method of purchase. If the Optionee
elects to use Common Stock to exercise the Options, the fair market value of
such Common Stock shall be the mean of the high and low prices of shares of
Common Stock of the Company traded on the date of exercise as reported on The
New York Stock Exchange, Inc. Composite Transactions Reporting System. Date of
exercise shall be deemed to be the date set forth on the notice of exercise.
Such exercise shall be subject to payment and such approval as may be required
under policies and procedures established by the Committee
2
<PAGE> 3
designated by the Board of Directors of the Company to administer and interpret
the Plan (the "Committee"). No shares shall be issued or delivered until full
payment therefor has been made.
5. The Options granted hereunder are not transferable by the
Optionee otherwise than by will or the laws of descent and distribution and are
exercisable, during the Optionee's lifetime, only by the Optionee. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the
Options, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
the Options or any right or privilege conferred hereby, the Options and the
right and privilege conferred hereby shall immediately become null and void.
6. The Company may, at any time, in its sole discretion and with
or without cause, cancel the Options, in whole or in part, to the extent they
have not become exercisable at the time of such action.
7. The Optionee shall have no rights as a stockholder with
respect to any shares of Common Stock subject to the Options prior to the date
of issuance to the Optionee of a certificate or certificates for such shares.
8. By accepting the Options, the Optionee agrees for himself or
herself and his or her legal representative that any and all shares of Common
Stock purchased upon the exercise of either Option shall be acquired for
investment and not with a view to, or for sale in connection with, any
distribution thereof, and that each notice of the exercise of any portion of
the Options shall be accompanied by a representation and agreement in writing
signed by the Optionee or the Optionee's legal representative, as the case may
be, to the foregoing effect and, to the effect that no sale of such shares of
Common Stock shall be made other than in compliance with the registration
provisions of the Securities Act of 1933 or pursuant to an exemption therefrom;
provided, however, if at the time such notice of exercise is given the shares
issuable upon exercise of the Options are registered under the Securities Act
of 1933, the Optionee, if Optionee is an executive officer, director or owner,
directly or indirectly, of five percent (5%) or more of the outstanding shares
of Common Stock, or is (or may be deemed to be) an affiliate of the Company
within the meaning of the rules and regulations under the Securities Act of
1933, shall, in lieu of the aforesaid representation and agreement, furnish an
agreement in writing to the effect that he or she shall not offer or sell any
of shares acquired as a result of such exercise unless the Company has
registered such shares for resale under the Securities Act of 1933, or such
Optionee sells such shares pursuant to an exemption from the registration
requirements of such Act.
9. The Optionee shall be considered to be in the employment of
the Company as long as the Optionee remains an employee of either the Company,
a parent or subsidiary corporation (as defined in section 425 of the Code) of
the Company, or a corporation or a parent or subsidiary of such corporation
assuming or substituting a new option for this Option. Any question as to
whether and when there has been a termination of such employment, and the cause
3
<PAGE> 4
of such termination, shall be determined either by the Committee or the Board
of Directors of the employing corporation, and its determination shall be
final. Nothing herein contained shall confer upon the Optionee any right with
respect to continuance of employment by the Company or interfere in any way
with the right of the Company to terminate the Optionee's service,
responsibilities, duties and authority to represent the Company or such
subsidiary at any time, in its sole discretion and with or without cause.
10. If at any time the Company shall determine in its discretion
that the listing or qualification of the shares of Common Stock subject hereto
under any securities exchange requirements or under any applicable state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of the Options or the issue of shares hereunder, the Options may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company.
11. This Option may be adjusted or required to be surrendered
pursuant to the provisions of Section 7 of the Plan.
12. Upon an exercise of this Option, the Company may be required
to withhold federal and local tax with respect to the realization of
compensation by the Optionee as a result of exercise of this Option. In the
event the Optionee does not deliver to the Company Common Stock to satisfy any
such withholding requirement, the Company is hereby authorized to satisfy any
such withholding requirement out of (i) any cash or Common Stock distributable
upon such exercise and (ii) any other cash compensation then or thereafter
payable to the Optionee. To the extent that the Company in its sole discretion
determines that such sources are or may be insufficient to fully satisfy such
withholding requirement, the Optionee, as a condition to the exercise of this
Option, shall deliver to the Company cash or Common Stock in an amount
determined by the Company to be sufficient to satisfy any withholding
requirement.
13. Any notice to be given to the Company under this Agreement
shall be addressed to the Corporate Secretary of the Company at 17001
Northchase Drive, Houston, Texas 77060, and any notice to be given to the
Optionee under this Agreement shall be addressed to the Optionee at the address
designated below in the space provided therefor; provided, however, that either
party may substitute a different address by notice in writing to the other.
Except as otherwise provided in this Agreement, any such notice shall be deemed
to have been duly given if and when enclosed in a properly sealed envelope
addressed as aforesaid and deposited, postage prepaid, in a post office or
branch post office regularly maintained by the United States Government.
14. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their successors, but neither this Agreement nor any
rights hereunder shall be assignable by the Optionee except as specifically
provided for herein.
4
<PAGE> 5
15. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Texas.
ANADARKO PETROLEUM CORPORATION
By
-------------------------------------------
ATTEST: Senior Vice President, Administration
- ---------------------------
Corporate Secretary
-------------------------------------------
OPTIONEE
-------------------------------------------
Address
-------------------------------------------
City, State, Zip Code
-------------------------------------------
Social Security Number
WITNESS:
- ---------------------------
5
<PAGE> 1
EXHIBIT 10(b)(xviii)
ANADARKO PETROLEUM CORPORATION
RESTRICTED STOCK AGREEMENT
Agreement made as of ____________________________ between ANADARKO PETROLEUM
CORPORATION (the "Company") and First Name~ Last Name~ ("Employee").
1. Grant.
(a) Shares. Pursuant to the Company's 1993 Stock Incentive Plan (the
"Plan"), Shares~ shares of the Company's common stock, par value $0.10, will
be issued as hereinafter provided in the Employee's name. Such shares shall be
subject to certain restrictions as hereinafter described pursuant to the Plan
and this Agreement (the "Restricted Shares").
(b) Issuance of Shares. The Restricted Shares will be issued upon
acceptance hereof by the Employee.
(c) Plan Incorporated. Employee acknowledges receipt of a copy of
the Plan, and agrees that this grant of Restricted Shares shall be subject to
all of the terms and provisions of the Plan, including future amendments
thereto, if any.
2. Restrictions.
The Employee hereby accepts the Restricted Shares when issued and
agrees with respect thereto as follows:
(a) Forfeiture Restrictions. Except as may be otherwise provided in
the Plan, (i) the Restricted Shares may not be sold, assigned, pledged,
exchanged, hypothecated or otherwise transferred or disposed of to the extent
then subject to the Forfeiture Restrictions, and (ii) in the event of
termination of Employee's employment with the Company and its subsidiaries for
any reason other than by reason described in Paragraph 2(c) of this Agreement,
including but not limited to retirement, the Employee shall, for no
consideration, forfeit to the Company all Restricted Shares to the extent then
subject to the Forfeiture Restrictions. The prohibition against transfer and
the obligation to forfeit and surrender Restricted Shares to the Company upon
termination of employment are herein referred to as "Forfeiture Restrictions".
The Forfeiture Restrictions shall be binding upon and enforceable against any
transferee of Restricted Shares.
(b) Lapse of Forfeiture Restrictions. The Forfeiture Restrictions
shall lapse as to the Restricted Shares on _________________________ provided
that the Employee has been continuously employed by the Company or its
subsidiaries from the date of this Agreement through the lapse date.
<PAGE> 2
(c) Termination. If Employee's employment with the Company is
terminated, the Forfeiture Restrictions on all Restricted Shares shall lapse
immediately as of the date of such termination of employment if Employee's
employment is terminated by reason of death, total and permanent disability, as
determined by the Company, or by the Company for any reason other than because
of Employee's gross and deliberate disregard of duties and responsibilities as
an Employee of the Company or one of its subsidiaries or his engaging in a
criminal act constituting a felony against the Company or one of its
subsidiaries as determined by the Board of Directors of the Company pursuant to
an affirmative vote of two thirds of the entire membership of the Board of
Directors of the Company finding, in good faith, that Employee was guilty of
such conduct.
(d) Change of Control. In the event of any Change of Control as
defined in the Plan, (i) if the Employee is not subject to Section 16 of the
Securities Exchange Act of 1934 ("Section 16"), the Forfeiture Restrictions
shall lapse on all Restricted Shares immediately as of the date of such Change
of Control or (ii) if the Employee is subject to Section 16, the Forfeiture
Restrictions shall lapse on the date of such Change of Control on all
Restricted Shares which were granted on a date more than six-months earlier
than the date of such Change of Control and Forfeiture Restrictions shall lapse
on any remaining Restricted Shares on the date which is six months after the
date of grant of such Restricted Shares.
(e) Certificates. Certificates evidencing the Restricted Shares will
be issued by the Company in the Employee's name, pursuant to which the Employee
shall have voting rights and receive dividends. The certificates may bear a
legend restricting or incorporating the restrictions, and the Company may cause
the certificates to be delivered upon issuance to the Secretary of the Company
or such other depositary as may be designated by the Committee which
administers the Plan as a depositary for safe-keeping until any restrictions
lapse or forfeiture occurs pursuant to the terms of the Plan and this grant.
The Company may require Employee to execute and deliver stock powers in the
event of forfeiture. Upon the lapse of the Forfeiture Restrictions without
forfeiture, the Company will cause a new certificate or certificates to be
issued without legend in the name of the Employee.
3. Special Additional Limitations.
If payment of withholding taxes on the Restricted Shares is required
at the time that the Forfeiture Restrictions lapse, payment may be made either
in cash or by electing to have a portion of the Restricted Shares which are no
longer subject to Forfeiture Restrictions withheld.
4. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of any
successor to the Company and all persons lawfully claiming under the Employee.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by an officer thereunder duly authorized, and the Employee has
executed this Agreement, all as of the date first above written.
ANADARKO PETROLEUM CORPORATION
By
--------------------------------------
Senior Vice President, Administration
----------------------------------------
First Name Last Name
3
<PAGE> 1
EXHIBIT 10(b)(xx)
ANADARKO PETROLEUM CORPORATION
1993 STOCK INCENTIVE PLAN
PERFORMANCE SHARE AGREEMENT
THIS AGREEMENT, dated the ____ day of ________________________,
between Anadarko Petroleum Corporation (the "Company") and
__________________________________________________________ ("Employee").
W I T N E S S E T H:
1. Grant. Pursuant to the Company's 1993 Stock Incentive Plan (the
"Plan"), the Company hereby grants to Employee, subject to the terms and
conditions of the Plan, and subject further to the terms and conditions herein
set forth, xxx,xxx shares of the $0.10 par value common stock of the Company
("Performance Shares"), to be issued as hereinafter provided in Employee's name
upon the Company's achievement of pre-determined objectives for a specified
performance period. In no event shall Employee be issued more than xxx,xxx
Performance Shares pursuant to this Agreement.
2. Pre-determined Provisions.
(a) Performance Period. The period beginning on January 1, 1998
and ending December 31, 2001 will be the performance period (the "Performance
Period").
(b) Peer Companies. The following companies are the peer
companies ("Peer Companies") to be used in the award determination. Any Peer
Company that ceases to be a publicly traded entity on a recognized stock
exchange during the Performance Period will be removed from the Peer Company
list. No companies may be added to the list during the Performance Period.
[INSERT PEER COMPANIES]
(c) Performance Objectives. The number of Performance Shares to
be issued to Employee will be determined at the end of the Performance Period
by comparing the Company's annualized average quarterly total shareholder
return ("TSR") over the Performance Period to each of the Peer Companies'
annualized average quarterly TSR for the same period.
TSR is calculated over the Performance Period by totaling the TSR's
for each of the 16 fiscal quarters in the period and dividing by 4. Each
quarter's TSR is calculated as follows:
1
<PAGE> 2
The closing stock price at the end of the fiscal quarter
plus
Dividends paid during the fiscal quarter
divided by
The closing stock price at the end of the previous fiscal quarter
(d) Award Determination. At the end of each the Performance
Period, the Peer Companies and the Company shall be ranked based on their TSR
for the period from the highest TSR being number 1 to the lowest TSR being
number 11. If the Company's TSR is in the first quartile of the ranked
companies, Employee will be issued 150 percent of the Performance Shares. If
the Company's TSR is in the second quartile of the ranked companies, Employee
will be issued 100 percent of the Performance Shares. If the Company's TSR is
below the second quartile of the ranked companies, Employee will not be issued
any Performance Shares. In the event the calculation for determining the
quartile ends in a fraction, the calculation will be "rounded" to include the
next ranked company in the quartile (see Exhibit A).
(e) Disability or Death. If Employee's employment with the
Company is terminated as a result of (i)disability within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended or (ii)death
of Employee, TSR shall be calculated for the Company and the Peer Companies
using the closing stock price on the date employment ceases. The number of
Performance Shares to be issued to Employee shall be pro-rated for the actual
number of calendar quarters completed plus a full quarter credit for the
quarter in which the termination occurred.
(f) Retirement. If Employee's employment with the Company is
terminated as a result of retirement, payout will be made at the end of the
period based upon the TSR performance for the period. The number of
Performance Shares to be issued to Employee shall be pro-rated for the actual
number of calendar quarters completed plus a full quarter credit for the
quarter in which the retirement occurred.
(g) Change of Control. Upon termination of employment of
Employee as a result of any Change of Control as defined in the Plan, TSR shall
be calculated for the Company and the Peer Companies using the closing stock
price on the date of the Change of Control. Payout will be the higher of the
Company's TSR ranking at Change of Control or 100% of the Performance Shares.
The number of Performance Shares to be issued to Employee shall be pro-rated
for the actual number of calendar quarters completed, plus a full quarter
credit for the quarter in which the Change of Control occurred.
3. Tax Withholding. Employee may be required to pay to the Company, and
the Company shall have the right and is hereby authorized to withhold from any
payment made under this Agreement or from any other compensation or other
amount owing to Employee, the amount (in cash, Performance Shares, other
securities, other Awards or other property) of any applicable withholding taxes
due in connection any Performance Shares granted hereunder and to take such
other action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes. In the case of payments made
hereunder in the form of Performance
2
<PAGE> 3
Shares, at the Committee's discretion Employee may be required to pay to the
Company the amount of any taxes required to be withheld with respect to such
Shares or, in lieu thereof, the Company shall have the right to retain (or
Employee may be offered the opportunity to elect to tender in accordance with
rules established by the Committee) the number of Performance Shares whose
aggregate Fair Market Value equals the amount required to be withheld.
4. Limits on Transfer of Performance Shares. Unless otherwise determined
by the Committee no Performance Shares may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by Employee other than,
in the case of Performance Shares which are not forfeited upon the death of
Employee, by will or by laws of descent and distribution and any such purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall
be void and unenforceable against the Company.
5. Ownership and Possession. Employee shall not have any rights as a
stockholder with respect to any Performance Shares granted hereunder.
6. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successor to the Company and all persons lawfully claiming under
Employee.
7. No Rights to Continued Employment. Neither this Agreement nor the Plan
shall be construed as giving Employee any right to continue in the employ of
the Company or any of its Affiliates.
8. Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Texas and applicable Federal law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed
by an officer thereunder duly authorized, and Employee has executed this
Agreement, as of the date first above written.
ANADARKO PETROLEUM CORPORATION
By
-------------------------------------
Charles G. Manley
Sr. Vice President, Administration
---------------------------------------
Officer's Name
3
<PAGE> 4
EXHIBIT A
<TABLE>
<CAPTION>
No. of Companies Company Company
(including APC) Ranking Ranking
Top 25% 50-75%
<S> <C> <C>
11 (3) 1,2,3 (6) 4,5,6
10 (2.75) 1,2,3 (5.5) 4,5,6
9 (2.5) 1,2,3 (5) 4,5
8 (2.25) 1,2,3 (4.5) 4,5
7 (2) 1,2 (4) 3,4
6 (1.75) 1,2 (3.5) 3,4
5 (1.5) 1,2 (3) 3
4 (1.25) 1,2 (2.5) 3
</TABLE>
4
<PAGE> 1
EXHIBIT 10(b)(xxii)
KEY EMPLOYEE CHANGE OF
CONTROL CONTRACT
AGREEMENT by and between Anadarko Petroleum Corporation, a
Delaware corporation (the "Company") and ____________ (the "Executive"), dated
as of the ___ day of _______, 199_.
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1.Certain Definitions. (a) The "Effective Date" shall mean
the first date during the Change of Control Period (as defined in Section 1(b))
on which a Change of Control (as defined in Section 2) occurs. Anything in
this Agreement to the contrary notwithstanding, if a Change of Control occurs
and if the Executive's employment with the Company is terminated prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at
the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 90 days prior to the
<PAGE> 2
Renewal Date the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or (iv) any
acquisition pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation by the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of
assets of another entity (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Common
Stock
-2-
<PAGE> 3
and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i)
During the Employment Period, (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned to the Executive at
any time during the 120-day period immediately preceding the Effective Date and
(B) the Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or any office
or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on corporate, civic
or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company
in accordance with this Agreement. It is expressly understood and agreed that
to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base salary ("Annual
Base Salary"), which shall be paid at a
-3-
<PAGE> 4
monthly rate, at least equal to twelve times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be reviewed
no more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base
Salary, the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal
to the Executive's target annual bonus under the Company's Annual Incentive
Bonus Plan, or any comparable bonus under any predecessor or successor plan,
for the fiscal year in which the Effective Date occurs, which shall be
calculated as follows: (A) the target bonus percentage as established by the
Board prior to the Effective Date for the fiscal year in which the Effective
Date occurs, multiplied by (B) the Executive's Annual Base Salary (the "Recent
Annual Bonus"). In the event that, prior to the Effective Date, the
Executive's target bonus percentage has not been established by the Board under
the Annual Incentive Bonus Plan or any comparable bonus under any predecessor
or successor plan, then for purposes of this Agreement, the Executive's Recent
Annual Bonus shall be calculated by using the target bonus percentage for the
other executives in the Executive's peer group (determined based on title,
responsibilities and duties) who are parties to a Key Employee Change of
Control Contract. Such Annual Bonus shall be paid no later than January 31 of
the fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
regular, annual incentive opportunities), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated companies
for the Executive under such plans, practices, policies and programs as in
effect at any time during the 120-day period immediately preceding the
Effective Date or if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company
and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
-4-
<PAGE> 5
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its affiliated companies
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses, in accordance
with the most favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at any time during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it
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may give to the Executive written notice in accordance with Section 12(b) of
this Agreement of its intention to terminate the Executive's employment. In
such event, the Executive's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean
the absence of the Executive from the Executive's duties with the Company on a
full-time basis for 180 consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be total and permanent by
a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) Retirement. The Executive's employment shall
terminate automatically upon the Executive's Retirement. For purposes of this
Agreement, "Retirement" shall mean termination of the Executive's employment by
the Company for any reason on or after the first day of the month next
following the Executive's 65th birthday (the "Normal Retirement Date") or
termination by the Executive upon the satisfaction of the requirements for
early retirement (the "Early Retirement Date") under the early retirement
provisions of the Company's Retirement Plan (the "Retirement Plan").
Notwithstanding anything to the contrary, if the Executive terminates
employment for Good Reason, such termination shall not be deemed to be a
Retirement for purposes of this Agreement despite the fact that the Executive
may qualify for early retirement under the Company's Retirement Plan.
(c) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company
which specifically identifies the manner in which the Board or Chief
Executive Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly
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adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is guilty
of the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(d) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 4(a) of this Agreement,
or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section
4(a)(i)(B) hereof or the Company's requiring the Executive to travel
on Company business to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly permitted by
this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(d), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(e) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in
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reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
date on which the Company notifies the Executive of such termination, (iii) if
the Executive's employment is terminated by reason of Retirement, either the
date on which the Company notifies the Executive of such termination (on or
after the Normal Retirement Date) or the date on which the Executive ceases
employment with the Company (on or after the Executive's Early Retirement
Date), as the case may be, and (iv) if the Executive's employment is terminated
by reason of death or Disability, the date of death of the Executive or the
Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Retirement, Death or Disability. If, during
the Employment Period, the Company shall terminate the Executive's employment
other than for Cause, Retirement or Disability or the Executive shall terminate
employment for Good Reason, the Company shall provide the Executive with the
following compensation and benefits.
(i) The Company shall pay to the Executive in a
lump sum in cash within 20 days after the Date of Termination the aggregate of
the following amounts:
A. the sum of (1) the Executive's
Annual Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of (x) the higher
of (I) the highest annual bonus earned by the Executive for
the last three fiscal years prior to the Effective Date and
(II) the Annual Bonus paid or payable for the most recently
completed fiscal year during the Employment Period, in each
case, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months or during which the
Executive was employed for less than twelve full months) (such
higher amount being referred to as the "Highest Annual Bonus")
and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 (the
"Pro-Ration Fraction") and (3) any accrued vacation pay, to
the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
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<PAGE> 9
B. an amount equal to the product of
(1) the lesser of (x) 2.9 and (y) the number of years (with
partial years expressed as a fraction thereof) remaining until
the Executive reaches the Normal Retirement Date and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the
Highest Annual Bonus; and
C. an amount equal to the total value
of the Executive's Restoration Account (as defined in the
Company's Savings Restoration Plan (the "SRP")), with such
amount being the higher of (1) the value of the Executive's
Restoration Account on the Executive's Date of Termination or
(2) the value of the Executive's Restoration Account on the
date of the Change of Control, in each case with "value"
determined under the applicable change of control provisions
in the SRP; and
D. an amount equal to the additional
Company matching contributions which would have been made on
the Executive's behalf in the Company's Employee Savings Plan
(the "ESP") (assuming continued participation on the same
basis as immediately prior to the Effective Date), plus the
additional amount of any benefit the Executive would have
accrued under the SRP as a result of contribution limitations
in the ESP, until the earliest to occur of (1) the expiration
of the 36-month period following the Date of Termination and
(2) the Executive's Normal Retirement Date (with the Company's
matching contributions being determined pursuant to the
applicable provisions of the ESP and the SRP and based upon
the Executive's compensation (including any amounts deferred
pursuant to any deferred compensation program) in effect for
the 12-month period immediately prior to the Effective Date);
and
E. an amount equal to the sum of the
present values, as of the Date of Termination, of (1) the
accrued retirement benefit payable under the Company's
Retirement Restoration Plan (the "RRP") and (2) the additional
retirement benefits that the Executive would have accrued
under the Retirement Plan and the RRP if the Executive had
continued employment until the earliest to occur of (a) the
expiration of the three year period following the Date of
Termination and (b) the Executive's Normal Retirement Date
(assuming that the Executive's compensation in each of the
additional years is that required by Section 4(b)(i) and
Section 4(b)(ii) hereof), with the present values being
computed by discounting to the Date of Termination the accrued
benefit and the additional retirement benefits payable as lump
sums at an assumed benefit commencement date of the later of
(i) the date the Executive attains age 55 and (ii) the date
three years after the Date of Termination (but in no event
later than Normal Retirement Date), at the rate of interest
used for valuing lump-sum payments in excess of $25,000 for
participants with retirement benefits commencing immediately
under the Retirement Plan, as in effect as of the Effective
Date; and
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F. an amount equal to the present
value, as of the Date of Termination, of the amounts of
deferred compensation (together with any accrued interest or
earnings thereon) that the Executive would be due if the
Executive's employment with the Company had continued until
the Normal Retirement Date and the Executive had received the
15 annual payments pursuant to the terms of each deferred
compensation agreement entered into by the Executive in
connection with the Company's Executive Deferred Compensation
Plans (such present value to be computed by discounting the
deferred compensation payment amount to the Date of
Termination at the rate of interest paid on one year
certificates of deposit by 100 large banks and savings
institutions as published in The Wall Street Journal's
"Consumer-Savings Rates" column, as in effect as of the Date
of Termination).
(ii) The Company shall, at its sole expense as
incurred, provide the Executive with (A) financial planning services
until the third anniversary of the Date of Termination on the same
basis as was provided immediately prior to the Date of Termination,
and (B) outplacement services at a cost to the Company not to exceed
$30,000, the scope and provider of which shall be selected by the
Executive in the Executive's sole discretion; and
(iii) Until the earlier of (A) the third
anniversary of the Date of Termination and (B) the Executive's
reaching the Normal Retirement Date, the Company shall maintain in
full force and effect for the Executive all life, accident,
disability, medical and health care benefit plans and programs or
arrangements in which the Executive was entitled to participate, at
the same levels and rates, in which the Executive was participating
immediately prior to the Effective Date, provided that the Executive's
continued participation is possible under the general terms and
provisions of such plans and programs, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other
plan during such applicable period of eligibility. In the event that
the Executive's participation in any such plan or program is barred
due to the eligibility and participation requirements of such plan or
program as then in effect, the Company shall arrange to provide
benefits substantially similar to those to which the Executive was
entitled to receive under such plans and programs of the Company prior
to the Effective Date. In such event, appropriate adjustments shall
be made so that the after-tax value thereof to the Executive is
similar to the after-tax value of the benefit plans in which
participation is barred. Benefits provided pursuant to this paragraph
are contractual only and are not to be considered a continuation of
coverage as provided under Section 601 et seq. of ERISA and Section
4980B of the Code. For purposes of determining the Executive's
eligibility (but not the time of commencement of benefits) for retiree
benefits pursuant to such plans and programs, the Executive shall be
considered to have remained employed until three years after the Date
of Termination and to have retired on the last day of such period,
and, if the Executive satisfies the eligibility
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requirements, such benefits shall commence no later than the
expiration of the three year continuation period provided in clause
(A) of this Section 6(a)(iii).
(iv) To the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 20 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer executives of the
Company and such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 20 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(c) shall include, and the Executive shall be
entitled after the Disability Effective Date to receive, disability and other
benefits at least equal to the most favorable of those generally provided by
the Company and its affiliated companies to disabled executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its affiliated
companies and their families.
(d) Retirement. If the Executive's employment is
terminated by reason of Retirement, this Agreement shall terminate without
further obligations to the Executive other than for Accrued Obligations and the
timely payment or provision of Other Benefits. In such case, all
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Accrued Obligations shall be paid to the Executive in a lump sum in cash within
20 days of the Date of Termination.
(e) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (i) the Annual Base
Salary through the Date of Termination, (ii) the amount of any compensation
previously deferred by the Executive, and (iii) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 20 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in
any plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, subject to
Section 12(f), shall anything herein limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or any
of its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies, including, but not limited to, the Company's Management
Life Insurance Plan and Override Pool Bonus Plan, at or subsequent to the Date
of Termination shall be payable in accordance with such plan, policy, practice
or program or contract or agreement except as explicitly modified by this
Agreement. Without limiting the generality of the foregoing, there shall be no
duplication of any of the payments or benefits described in Section 6 hereof,
and payments under paragraphs C, E and F of Section 6(a)(i) shall be in full
satisfaction of the amounts otherwise payable under the SRP, the RRP and the
Executive Deferred Compensation Plans, respectively.
8. Full Settlement; Legal Fees. The Company's
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and except as specifically provided in Section
6(a)(iii), such amounts shall not be reduced whether or not the Executive
obtains other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Executive or others of the validity or enforceability of,
or liability or entitlement under, any provision of this Agreement or any
guarantee of performance thereof (whether such contest is between the Company
and the Executive or between either of them and any third party, and including
as a result of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus in each case
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interest on any delayed payment at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any corresponding provisions
of state or local tax laws, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by KPMG Peat Marwick LLP or such other certified public accounting firm as may
be designated by the Executive (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the Company to the Executive
within five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
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(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such notice to
the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request
in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up
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Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
10. Confidential Information. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the Company
or any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 10 constitute a basis
for deferring or withholding any amounts otherwise payable to the Executive
under this Agreement.
11. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
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12. Miscellaneous. (a) This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
If to the Company: Anadarko Petroleum Corporation
P.O. Box 1330
Houston, Texas 77251-1330
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company
is "at will" and, prior to the Effective Date, the Executive's employment may
be terminated by either the Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have no further rights under
-16-
<PAGE> 17
this Agreement. From and after the Effective Date, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of
Directors, the Company has caused this Agreement to be executed in its name on
its behalf, all as of the day and year first above written.
-------------------------------------
[Executive]
ANADARKO PETROLEUM CORPORATION
By:
----------------------------------
-17-
<PAGE> 1
EXHIBIT 10(b)(xxv)
AMENDMENT TO
ANADARKO PETROLEUM CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Corporation") has
heretofore adopted the ANADARKO PETROLEUM CORPORATION EXECUTIVE DEFERRED
COMPENSATION PLAN which was restated and amended on April 1, 1987 (the
"Plan"); and
WHEREAS, the Corporation desires to amend the Plan:
NOW, THEREFORE, the Plan shall be amended, effective as of January 29,
1998, as follows:
1. Section 11 shall be replaced in its entirety by the following:
"11. Termination as to Prior Compensation Deferrals: The
Corporation may terminate the Plan at any time prior to a "Change of Control"
(as hereinafter defined) with respect to Compensation deferrals made prior to
the Corporation's termination of the Plan, but only if (i) the federal tax laws
change or are construed in such a manner as to materially adversely affect the
Corporation's after-tax net cost in providing the benefits due the Employee
under the Plan or (ii) the substantive provisions of the Employee Retirement
Income Security Act of 1974 (other than reporting and disclosure requirements)
become applicable to such deferrals under the Plan. If the Plan is terminated
pursuant to this Section 11, the Corporation agrees to pay each Employee to
whom annual installment payments pursuant to his Agreement have not commenced,
in lieu of amounts otherwise payable and not theretofore paid, the sum or sums
actually deferred with interest thereon at the rate per annum specified in the
Agreement compounded annually from the Commencement Date through date of
payment, less an amount equal to the benefits paid prior to such termination
with interest thereon at the same rate, compounded annually from the date of
such prior payment through the date of payment of the Plan termination benefit
pursuant to this Section 11. Such payment shall be made in the January
following the date of Plan termination. If the Plan is terminated pursuant to
this Section 11, the Corporation agrees to continue to make the installment
payments to each Employee to whom annual installment payments under his
Agreement have commenced. The Corporation may not terminate the Plan pursuant
to this Section 11 at any time after the occurrence of a "Change of Control".
For purposes of this Section 11, a "Change of Control" shall be deemed to
have taken place if any of the following occur:
<PAGE> 2
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Corporation Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation or (iv) any acquisition pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (a)
of this Section 11; or
(b) Individuals who, as of January 29, 1998, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to January 29, 1998, whose election, or nomination for
election by the Corporation's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation by the Corporation of a reorganization,
merger or consolidation or sale or other disposition of all or substantially
all of the assets of the Corporation or the acquisition of assets of another
entity (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
the Corporation or all or substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities, as the case may be, (ii) no Person (excluding any employee benefit
plan (or related trust) of the Corporation or such corporation resulting from
such Business Combination) beneficially own, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the
-2-
<PAGE> 3
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(d) Approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed this 29th day of January, 1998.
ANADARKO PETROLEUM CORPORATION
By:
-------------------------------------
Charles G. Manley
Senior Vice President, Administration
-3-
<PAGE> 1
EXHIBIT 10(b)(xxvii)
FIRST AMENDMENT TO
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
1987, 1988, 1989 AND 1990 PLAN YEARS
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Corporation") has
heretofore adopted the EXECUTIVE DEFERRED COMPENSATION PLAN as amended on
January 29, 1998 (the "Plan"); and
WHEREAS, the Corporation has entered into EXECUTIVE DEFERRED
COMPENSATION AGREEMENTS for the 1987, 1988, 1989 and 1990 Plan Years (the
"Agreements"); and
WHEREAS, the Corporation desires to amend each of the Agreements:
NOW, THEREFORE, each of the Agreements shall be amended, effective as
of January 29, 1998, as follows:
1. Item VII in each of the Agreements shall be replaced in its entirety
by the following:
"VII.
TERMINATION FOLLOWING
A CHANGE OF CONTROL
If Employee's employment is terminated prior to the date he is
eligible for early retirement under the Anadarko Retirement Plan and at any
time after a "Change of Control", as defined in the Plan, the Employee shall
for purposes of the Plan and this Agreement be considered to have remained
employed by the Corporation until the earlier of (i) his death, in which case
the Corporation shall pay to the Employee's beneficiary payments pursuant to
Item V above or (ii) the date he would have been eligible for benefit payments
pursuant to Item III above, in which case the Corporation shall pay to the
Employee payments pursuant to Item III above."
2. As amended hereby, each of the Agreements is specifically ratified and
reaffirmed.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused these presents to be
executed this 29th day of January, 1998.
ANADARKO PETROLEUM CORPORATION
By
------------------------------------
J. Stephen Martin
Vice President and General Counsel
--------------------------------------
Charles G. Manley
-2-
<PAGE> 1
EXHIBIT 10(b)(xxxi)
AMENDMENT TO
AMENDED AND RESTATED
ANADARKO SAVINGS RESTORATION PLAN
Dated January 1, 1995
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Company") has heretofore
adopted the AMENDED AND RESTATED ANADARKO SAVINGS RESTORATION PLAN Dated
January 1, 1995 (the "Plan"); and
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, the Plan shall be amended, effective as of January 29,
1998, as follows:
1. Section IX shall be replaced in its entirety by the following:
"IX.
CHANGE OF CONTROL
Upon a Change of Control, as defined in the Savings Plan, other
provisions of the Plan to the contrary notwithstanding, the benefits payable
under Article V hereof shall be payable as follow:
(a) all Participants shall be deemed to be vested in the Plan;
(b) Participants who terminate employment for any reason within
one year of a Change of Control shall be paid the higher of
(1) the total value of their Restoration Account on the date
of the Change of Control, or (2) the total value of their
Restoration Account at the Month End Valuation Date on or
immediately after termination;
(c) Participants who terminate employment for any reason later
than one year after a Change of Control shall be paid the
total value of their Restoration Account at the Month End
Valuation Date on or immediately after termination; and
(d) if the Plan is terminated within one year of a Change of
Control, pursuant to section XII, participants shall be paid
the higher of (1) the value of their Restoration Account on
the date of the Change of Control, or (2) the value of their
Restoration Account at the Month End Valuation Date on or
immediately after the Plan is terminated.
<PAGE> 2
For purposes of this section, "value" shall be determined by using the
fair market value of the underlying investment in the Restoration Account at
the close of the Business Day on or immediately prior to the date of valuation.
Notwithstanding the foregoing, for purposes of determining "value" of Company
Stock on the date of Change of Control, "value" shall mean the higher of (i)
the average of the closing stock prices per share of Company Stock on the New
York Stock Exchange Composite Tape during the ten trading days immediately
preceding the Change of Control or (ii) the highest price paid by any person in
any transaction constituting a Change of Control."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be executed this 29th day of January, 1998.
ANADARKO PETROLEUM CORPORATION
By:
----------------------------------------
Charles G. Manley
Senior Vice President, Administration
<PAGE> 1
EXHIBIT 12
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF COMPUTATION OF RATIOS
OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
FIVE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------------------------
thousands 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Income $205,318 $196,763 $ 65,624 $ 90,794 $106,824
Rentals 8,266 4,234 2,457 2,814 3,069
-------- -------- -------- -------- --------
Earnings 213,584 200,997 68,081 93,608 109,893
======== ======== ======== ======== ========
Gross Interest
Expense 62,095 55,986 52,557 41,635 38,000
Rentals 8,266 4,234 2,457 2,814 3,069
-------- -------- -------- -------- --------
Fixed Charges $ 70,361 $ 60,220 $ 55,014 $ 44,449 $ 41,069
======== ======== ======== ======== ========
Ratio of Earnings
to Fixed Charges 3.04 3.34 1.24 2.11 2.68
======== ======== ======== ======== ========
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, earnings include income before income taxes and
fixed charges. Fixed charges include interest and amortization of debt expenses,
and the estimated interest component of rentals. Certain amounts for prior years
have been restated to conform to the current presentation.
During the five years ended December 31, 1997, there were no shares of preferred
stock outstanding. Accordingly, the ratio of earnings to combined fixed charges
and preferred stock dividends for each of the five years is the same as the
ratio of earnings to fixed charges.
<PAGE> 1
EXHIBIT 13
SUMMARY FINANCIAL DATA*
<TABLE>
<CAPTION>
% Change
millions except per share amounts 1997 97-96 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 673.2 18 $ 569.0 $ 434.0 $ 482.5 $ 482.0
Operating Income 203.4 4 195.6 64.5 88.7 104.1
Net Income before Cumulative
Effect of Changes in
Accounting Principles 107.3 7 100.7 21.0 41.1 40.0
Net Income $ 107.3 7 $ 100.7 $ 21.0 $ 41.1 $ 117.4
Net Cash provided by Operating
Activities $ 362.0 15 $ 314.5 $ 248.3 $ 239.7 $ 274.3
Per Common Share
Net Income before Cumulative
Effect of Changes in
Accounting Principles $ 1.80 6 $ 1.70 $ 0.36 $ 0.70 $ 0.70
Net Income - Basic $ 1.80 6 $ 1.70 $ 0.36 $ 0.70 $ 2.05
Net Income - Diluted $ 1.78 5 $ 1.69 $ 0.36 $ 0.70 $ 2.04
Dividends $ 0.30 -- $ 0.30 $ 0.30 $ 0.30 $ 0.30
Average Shares Outstanding 59.7 1 59.2 58.9 58.8 57.2
Capital Expenditures $ 686 61 $ 427 $ 331 $ 423 $ 264
- -------------------------------------------------------------------------------------------------------------------------
Long-term Debt $ 956 31 $ 731 $ 674 $ 629 $ 543
Stockholders' Equity 1,117 10 1,014 910 900 864
- -------------------------------------------------------------------------------------------------------------------------
Total Assets $ 2,992 16 $ 2,584 $ 2,267 $ 2,142 $ 2,023
- -------------------------------------------------------------------------------------------------------------------------
Oil Reserves (MMBbls) 419.7 41 297.8 219.2 157.4 78.5
Gas Reserves (Tcf) 1.73 (5) 1.82 1.84 1.91 1.88
Total Reserves (million EEBs) 708.0 18 601.3 526.3 476.4 391.1
- -------------------------------------------------------------------------------------------------------------------------
Worldwide Finding Cost ($/EEB)** $ 4.28 55 $ 2.76 $ 2.74 $ 2.76 $ 4.07
Worldwide Reserve Replacement
(% of Production) 341% 14 299% 226% 308% 162%
</TABLE>
* Consolidated for Anadarko Petroleum Corporation (referred to herein as
Anadarko) and its principal subsidiaries, including Anadarko Algeria
Corporation, Anadarko Energy Services Company and Anadarko Gathering
Company. See Management's Discussion and Analysis.
** Worldwide finding costs are calculated by dividing worldwide costs incurred
by the worldwide reserve additions, excluding reserve sales in place.
<PAGE> 2
Hugoton Embayment
Anadarko's largest asset is reserves in the Hugoton Embayment, located in
southwest Kansas and the Oklahoma and Texas panhandles. The Company controls
about 1,000,000 lease acres in these areas and operates about 2,750 wells.
Anadarko's net production from the Hugoton Embayment in 1997 was 99.2 billion
cubic feet (Bcf) of gas and 1.53 MMBbls of oil and condensate. This represents
about 40 percent of Anadarko's total production. During 1997, Anadarko drilled
177 conventional wells, 49 horizontal wells and recompleted 55 wells in the
area. The Company plans to drill more than 200 wells in the area in 1998.
Anadarko's activities in the Hugoton Embayment are concentrated on three
areas: the shallow gas fields in southwest Kansas and the Oklahoma Panhandle,
the deeper oil and gas zones below shallow production, and horizontal drilling
in the shallow West Panhandle Field of Texas.
Shallow Production. Anadarko's oldest and largest field is the Kansas
Hugoton Field. With about 10 percent of the wells in the Field, Anadarko
controls nearly 14 percent of the Field's total production. Anadarko has a
continuing program of drilling infill and replacement wells in the Field. During
1997, the Company drilled about 50 shallow gas wells in the Hugoton Embayment.
Shallow in the Hugoton Embayment is 2,000-3,000 feet.
Deep Exploitation. The largest area of spending in the Hugoton Embayment is
in the deep drilling program, with multiple productive zones from 4,000-6,000
feet. Anadarko doubled its spending level in the deep play during 1997.
Beneath the shallow gas fields is an extensive network of deeper oil and
gas fields. The use of three-dimensional (3-D) seismic has proved successful in
exploiting these deeper pay zones. As of year-end 1997, Anadarko had acquired
480 square miles of 3-D seismic in the Hugoton Embayment. During 1997, the
Company drilled about 120 wells. Production from the deeper horizons averaged
nearly 4,000 BOPD and 60 MMcf/d of gas during 1997. Anadarko is now the largest
oil producer in the region.
Over the last five years, Anadarko has invested about $93 million on its
deep program. The Company drilled and completed more than 550 wells and added
reserves of 38 million EEBs, representing a cost of finding of $2.44 per EEB.
Anadarko increased its drilling opportunities in the deep Hugoton play
through a strategic alliance with Mobil signed in late 1997. In this new
Anadarko-operated venture, Mobil contributes 484,000 net undeveloped acres. In
return, Anadarko contributes about 150,000 acres that revert to the Company from
another operator in April 1999. Both parties own a 50-percent interest and
Anadarko is committed to spend at least $24 million over the next four years.
The venture can be extended indefinitely. Over the next decade, Anadarko may
drill up to 700 wells on the alliance's deep acreage. About 40 wells are planned
for 1998.
Anadarko has a vast gas gathering system in the Hugoton Embayment, with
about 2,300 miles of pipe connecting more than 1,300 Company-operated wells.
Combined, these systems move about 300 MMcf/d of gas, of which 250 MMcf/d is gas
from Anadarko's wells. These gathering assets add value. Pipeline pressures have
been lowered, allowing lower pressure wells to produce more gas into the system.
In addition, the Company is better able to manage natural gas volumes, with
several interstate export routes available from the mid-continent. Anadarko has
invested more than $120 million on gathering in the Hugoton Embayment since
1990.
The Company has 270 employees working in the Hugoton Embayment and is a
dominant player in the area. Our employees understand this area and effectively
combine experience with today's technology. In an area where hydrocarbons have
been produced for more than 75 years and production has long been on a natural
decline, Anadarko continues to increase production and add reserves.
West Panhandle. One of Anadarko's most active plays in 1997 was the West
Panhandle Field of Texas, located primarily in Moore County, Texas. Through an
innovative drilling program, the Company drilled 49 horizontal wells in the Play
in 1997. The program increased production capability by 22 MMcf/d of gas to 61
MMcf/d -- the highest rate from this Field since 1993.
<PAGE> 3
Golden Trend
Anadarko's fifth largest domestic onshore field is the Golden Trend of central
Oklahoma, located primarily in Garvin and Grady Counties. The economics of this
low-risk, long-life reserve play are closely tied to gas prices and Anadarko's
activities over the last decade have varied accordingly. At year-end 1997,
Anadarko's production from the Golden Trend was 22 MMcf/d of gas and 750 BOPD.
During 1997, the Company drilled 27 wells in the Golden Trend. The Company
has a working interest in 290 wells in the Golden Trend, of which 205 wells are
Anadarko-operated. Two packages of properties in the area were purchased during
1997, adding proved reserves and new drilling locations for 1998 and beyond.
Over the last five years, Anadarko has invested about $80 million to drill
120 wells, resulting in a cost of finding of less than $4.50 per EEB. Recently,
Anadarko has utilized a 40-acre infill drilling program in the area. To date, 23
increased density wells have been completed at a finding cost of less than $4
per EEB. Anadarko plans to drill 33 development wells in the Golden Trend in
1998.
Value is added to the Company's Golden Trend assets through the
Anadarko-operated Antioch Gas Gathering System. The system has 120 miles of pipe
and connects over 200 wells in the area. During 1997, the Antioch System moved
an average of 27 MMcf/d of gas.
Anadarko plans to grow its asset base and production in the Golden Trend.
The Company has a four-part strategy in this area which includes:
o Expansion of the 40-acre infill drilling program;
o Select acquisitions and joint venture opportunities for undeveloped
acreage;
o Develop and utilize technology to maximize reserve recovery and
economic returns;
o Integrate 3-D seismic technology to exploit secondary objectives and
expand known field limits.
Permian Basin
Anadarko's oil production from the Permian Basin of west Texas increased 37
percent, from 9,500 BOPD in 1996 to 13,000 BOPD at year-end 1997. The dramatic
increase in production was due to increased drilling activity in a number of
producing fields. The Company drilled 411 wells in the Permian Basin during 1997
compared to 182 wells in 1996. Throughout 1997, Anadarko had an average of 11
Company-operated rigs running in the area.
Over the last several years, a series of property trades, swaps, tactical
acquisitions and aggressive drilling campaigns has enhanced Anadarko's position
in the Permian Basin. Nearly 50 percent of the Company's oil production volumes
in 1997 were derived from this core area.
West Texas is the heart of Anadarko's domestic oil production. These
long-life fields are developed at low finding costs, generating high rates of
return for the Company. The 1997 work program focused on increasing production
and adding reserves through development drilling, increased density drilling,
workovers and recompletions, and installation of additional waterflood
facilities.
One of the Company's most active areas in the Permian Basin during 1997 was
Ector County, Texas where Anadarko operates the TXL North and South Units and
the Goldsmith Cummins Deep Unit. The Company drilled 151 wells in these Fields
during 1997, including a 10-acre spacing pilot program. Combined production from
the Fields increased to 5,100 BOPD in 1997, almost doubling 1996 levels.
Extending field limits was the focus of the work program in the Sharon
Ridge/Diamond M and Ketchum Mountain (Clearfork) Fields. During 1997, the
Company drilled 110 wells in these two Fields. The Fields are located in Scurry
and Irion Counties, Texas, respectively.
<PAGE> 4
In the Ketchum Mountain Field, Anadarko posted record production volumes of
over 3,000 BOPD. Anadarko leased an additional 17,000 acres in the area during
1997. In 1998, the Company plans to drill an additional 29 wells in the Field
and further strengthen its acreage position. Anadarko owns a 100-percent working
interest in the Ketchum Mountain Field.
During 1998, primary development drilling in the Permian Basin oil fields
will be combined with focused exploration for deeper targets which offer the
Company significant upside potential in both production and reserves over the
next few years.
East Texas
During 1997, Anadarko grew its operations in the Bossier Sand Play, located in
East Texas. Anadarko believes that this gas play offers significant potential
for the discovery of additional long-life gas reserves over the next several
years. The Company's production from the area at year-end 1997 was 12.6 MMcf/d
of gas.
Although located in the same geographic region as the Cotton Valley Reef
Play, the Bossier Play targets totally different horizons. Three separate
Bossier reservoirs exist on Anadarko's leasehold with net pay sand thickness in
many areas of more than 100 feet.
Anadarko began working the Bossier Play in 1996, drilling four successful
wells in the Mimms Creek Field of Freestone County, Texas. Drilling continued in
this Field during 1997, with six delineation wells. Anadarko believes that the
Mimms Creek Field has the potential for an additional 36 development wells over
the next three years.
Leasing activity accelerated in 1997, with Anadarko expanding its acreage
position around the Mimms Creek Field. Eight Anadarko-operated (100-percent
working interest) wells were drilled to extend the Field limits. Anadarko
participated in the drilling of 14 wells during 1997, all of which were
successful. The most significant well was the Black A-1, located in the adjacent
Dew West Field, flowing at an initial rate of 7.1 MMcf/d of gas.
Gulf of Mexico
A major component of Anadarko's production gain for 1997 came from the Gulf of
Mexico, offshore Texas and Louisiana. The 1997 work program focused on
increasing production levels from existing platforms. Production volumes from
the Gulf of Mexico grew from 2,000 BOPD and 119 MMcf/d of gas in 1996 to 5,500
BOPD and 160 MMcf/d of gas at year-end 1997.
The increase in oil production from the Gulf of Mexico is primarily from
the Mahogany Field and East Cameron 157; the increase in gas volumes is
primarily from East Cameron 157, South Marsh Island and Mahogany. Anadarko
invested about $100 million in the Gulf of Mexico in 1997 compared to $103
million in 1996.
About 10 percent of Anadarko's proved energy reserves are located in the
Gulf of Mexico. Anadarko is active in three areas in the Gulf of Mexico:
conventional oil and gas exploration and exploitation on the shelf, sub-salt
exploration and development, and deep-water exploration.
Matagorda Island 622/623. Gas production from the Matagorda Island 622/623
Complex increased dramatically during 1997. Discovered by Anadarko in 1980 under
a farm-out agreement from Amoco Production Company, this is the largest gas
field offshore Texas. Gross reserves in the Complex are estimated at 1.25
trillion cubic feet (Tcf). In 1997, the partners drilled four development wells,
worked over two original wells and recompleted another well. Flow rates from the
wells were impressive, with two of the development wells flowing more than 70
MMcf/d of gas each.
<PAGE> 5
During 1997, gas production from the six platforms in the Matagorda Island
Complex increased 72 percent, from a January 1997 rate of 189 MMcf/d of gas
(gross) to a year-end 1997 rate of 325 MMcf/d of gas (gross). Field production
capability in early 1998 was approaching 400 MMcf/d of gas and pipeline system
modifications were being made to move this additional gas to market by mid-1998.
Anadarko owns a 37.5-percent working interest in the Matagorda Island Complex.
Mahogany, Ship Shoal 349/359. 1997 was the first full year of production
from the Phillips-operated Mahogany platform. At the time this report was
released for printing, production from the platform was about 19,900 BOPD and 33
MMcf/d of gas. This is the industry's first commercial sub-salt field in the
Gulf of Mexico.
Five wells are now on production, with three of those wells producing from
zones other than the "P" sand -- the Field's main pay zone. As production from
the other zones depletes, the partners are planning to re-complete the wells
into the "P" sand. A sixth well from the platform is now drilling. Additional
drilling is planned and Anadarko expects production from the Mahogany Field to
increase further.
The Agate discovery, located at Ship Shoal 361 about six miles west of the
Mahogany Field, was announced commercial during 1997. Production will be tied
into the Mahogany platform in mid-1998, adding oil and gas volumes. Partners are
evaluating future drilling plans in the Agate Field, where Anadarko has a
50-percent working interest.
In the sub-salt play, Anadarko plans to drill up to three exploration wells
during 1998, two of which are Company-operated. Hickory, located at Grand Isle
116, and Tanzanite, located at Eugene Island 346, should both begin drilling in
March 1998.
To date, the Company has drilled or participated in nine sub-salt wells,
with four discoveries. Two of the discoveries are commercial -- Mahogany and
Agate; and two discoveries require delineation prior to determining
commerciality -- Teak and Monazite. Special processing of the 3-D seismic data,
called a pre-stack depth migration, is planned on the Monazite discovery in
1998. During 1997, Anadarko participated in two dry holes in the sub-salt play.
In the deepwater play, Anadarko has interests in 13 lease blocks offshore
Louisiana. Eleven of these blocks are Company-operated. The Company may drill
its first deepwater exploration well in late 1998, depending on rig
availability.
High Island 376. Anadarko has two Company-operated production platforms in
the High Island 376 Field, located about 150 miles offshore Texas. The High
Island 376 "A" platform has been producing since 1983. The second platform --
High Island 376 "B" -- was installed in 1994.
Production from the "B" platform increased from 1.7 MMcf/d of gas and 1,400
BOPD in early 1997 to a current rate of 24 MMcf/d of gas and 2,900 BOPD (gross).
Anadarko drilled a development well in the existing production intervals and a
horizontal gas well. The horizontal well had a 430-foot section and was
completed in late 1997, flowing 20 MMcf/d of gas. This was the Company's first
horizontal well from an offshore platform. Advanced drilling technology allows
horizontal and extended reach wells to be drilled from platforms. Anadarko has a
33.8-percent working interest in the High Island 376 Field.
East Cameron 157. Production from the 100-percent owned East Cameron 157
platform, located offshore Louisiana, increased during 1997. Anadarko drilled
two new development wells from the platform. Anadarko plans to recomplete two
existing wells and may drill an exploration well from the platform in 1998. Six
wells are on production, with a combined rate of 18 MMcf/d of gas and 450
barrels of condensate per day (BCPD).
Many of the mature fields across the Gulf of Mexico, owned by Anadarko and
industry, are on a steep production decline. Anadarko's re-development programs
help increase production volumes and improve ultimate reserve recovery.
<PAGE> 6
Alaska
Anadarko's presence in Alaska has grown over the last several years and Alaska
is now a core area for the Company. Active exploration and development is
underway on the North Slope and the Company plans to drill wildcat wells in the
Cook Inlet area.
The Alpine Field. Development of the ARCO Alaska-operated Alpine Field is
moving forward, with first oil production expected in 2000. Located on the North
Slope, the Alpine Field is the largest domestic onshore discovery announced in
the last decade with proven and potential oil reserves of 365 MMBbls (gross).
Initial production from the Field is expected to be 40,000 BOPD (gross),
increasing to 70,000 BOPD (gross) in 2001.
In February 1998, the partners received a final U.S. Army Corps of
Engineers permit, allowing construction on the North Slope to begin. The
partners plan to drill up to three appraisal wells in the Alpine Field this
winter season (1997-98). The wells are designed to test development concepts and
to determine whether the Alpine Formation contains additional reserves which
could be produced from the already permitted facilities. The first well began
drilling in late February 1998.
The Alpine Field is being developed much like an offshore platform -- a
stand-alone facility without roads. A gravel airstrip is being constructed so
that equipment and personnel can be flown to the Field. Gravel for the well pads
is also being installed. Technological advancements in drilling will allow the
development wells to be directionally drilled from only two pads, limiting
surface impact for the 40,000 acre oil Field to only about 100 acres.
Development planning at Alpine could include the drilling of over 100
wells. Production from the Field will move through a 20-inch pipeline that will
connect the Alpine Field to the Kuparuk River Field. The most critical section
of the pipeline is currently being installed 110 feet below the Colville River,
eliminating the need for river crossings. Installation of the remainder of the
pipeline connecting Alpine to Kuparuk is scheduled for 1999. From Kuparuk, the
Alpine oil will flow into the Trans Alaska Pipeline System.
Full-field development at Alpine is expected to cost far less than
originally anticipated. The partners have established an alliance of contractors
in Alaska to fabricate about 60 percent of the equipment, including the
production modules that are being built in Kenai, Alaska. The remaining
components will be fabricated in Canada, along the Texas Gulf coast and in
Louisiana. Procurement of long lead-time items and detailed engineering for the
Field facilities is underway. The partners have reduced development costs at
Alpine by about 30 percent compared to other North Slope fields. Anadarko owns a
22-percent working interest in the Alpine Field.
The Cook Inlet. Anadarko operates an exploration program, in equal
partnership with ARCO Alaska, in the Cook Inlet region of southern Alaska.
Anadarko signed an alliance with ARCO Alaska during 1996 and today the partners
are exploring on 166,000 acres.
During 1997, a 140-mile, 2-D seismic acquisition program was completed. The
data were processed and used to generate a list of exploratory prospects. In
mid-1998, the Company plans to drill its first exploration well on the Moquawkie
Prospect, located onshore on the northwest side of the Cook Inlet.
Fields in the Cook Inlet area have been producing for more than 30 years.
Relying on advanced seismic acquisition and imaging, Anadarko is searching for
fields that may have been overlooked in the 1960s.
<PAGE> 7
Algeria
During 1997, Anadarko's efforts in Algeria were focused on three objectives:
construction of the Central Production Facility for the HBNS Field, development
planning for the Hassi Berkine (HBN)/El Biar and Qoubba Fields and ongoing
exploration and delineation drilling. Anadarko invested $173 million in Algeria
in 1997 compared to about $85 million in 1996.
The continued success of the exploration and delineation drilling program
in 1997 allowed the Company to increase its estimate of discovered crude oil and
condensate reserves by 33 percent to 2.0 billion barrels (gross). Due to
development drilling in existing fields, Anadarko's net proved reserves
increased from 124.3 MMBbls at year-end 1996 to 184.1 MMBbls at year-end 1997.
Algerian reserves made up 26 percent of Anadarko's total proved reserves at
year-end 1997.
The HBNS Field. The CPF for the HBNS Field is nearly complete and first
production is expected in May 1998. Discovered in 1995, the HBNS Field will be
readied for first production in only three years.
In 1996, SONATRACH, the national oil and gas enterprise of Algeria,
received a Provisional Exploitation Authorization (PEA) from the Algerian
government for wells in the HBN/El Biar and HBNS Fields. This approval to begin
development was followed by a $177-million Engineering, Procurement and
Construction (EPC) contract with Brown & Root Condor for Stage I production
facilities at HBNS. Construction began in January 1997.
Oil production from the HBNS Field will move through SONATRACH's existing
pipeline network, offering the Company several options. A new 30-inch pipeline
with a capacity of about 300,000 BOPD will run west to the Nezla area and north
past the Hassi Messaoud Field. Production can then be directed to three ports
along the Algerian Coast at Skikda, Arzew and Bejai.
The Company has been identifying markets for this new oil production. Oil
from the HBNS Field will be lifted by tanker load and sold as Saharan Blend to
customers primarily in the Mediterranean area. Saharan Blend is a very light,
sweet, low sulfur crude that provides refiners with large quantities of high
quality jet and diesel fuel. The first cargo is expected to be lifted in June
1998, with revenues reflected in the Company's second quarter results.
Anadarko and SONATRACH expect to receive the Exploitation License (EL) for
the HBNS Field from the Algerian government in early 1998. The EL will succeed
the PEA and provide for full development of the HBNS Field. Anadarko expects to
sign an EPC contract for Stage II production facilities for the HBNS Field later
this year. Construction of Stage II facilities is expected to take 18-24 months.
Full development of the HBNS Field will require about 50 wells, including
water and gas injection wells. Through mid-February 1998, eight wells had been
drilled in the HBNS Field, with two rigs running. Selection of development well
locations is based on a 3-D seismic survey acquired over the HBNS Field in 1997.
The improved imagery from these data allows the Company to place development
wells in optimum locations, increasing both reserve recovery and production
potential. 3-D seismic data were also acquired during 1997 over the HBN/El Biar
Field and the newly discovered Hassi Berkine South East (HBNSE) Field, located
on the southeast edge of the HBNS Field.
1997 Exploration Program. During 1997, Anadarko drilled 11 exploration
wells in Algeria (nine Anadarko-operated wells and two BHP-operated wells), with
seven discoveries. The program focused on satellite fields located around the
Company's large fields, as well as higher-risk, higher reward prospects testing
additional geologic plays. Five of the discoveries were drilled on
Anadarko-operated acreage and two discoveries were drilled on the BHP Petroleum
(Algerie) Inc. (BHP)-operated Block 402.
Two of the successful exploratory wells were located within five miles of
the HBNS Field: the HBNSE-1 and the Hassi Berkine Central No. 1 (HBNC-1). The
HBNC-1 well flowed 16,624 BOPD and appears to be an extension of the HBNS Field.
Discovering a separate but adjacent field, the HBNSE-1 well flowed 17,092 BOPD.
A delineation well, the HBNSE-2 well, was drilled north of the HBNSE-1 well in
late 1997. The HBNSE-2 well flowed 3,915 BOPD during brief testing. Development
plans for the HBNSE Field are being evaluated.
<PAGE> 8
A successful exploration well, the Qoubba North No. 1 (QBN-1), was drilled
about six miles north of the discovery well for the giant Qoubba Field. The
QBN-1 well flowed 1,214 BOPD and may be an extension of the Qoubba Field. A
delineation well is planned for the first half of 1998 that will help determine
if the two Fields are connected.
Exploring Blocks 401 and 402. Anadarko participated in drilling two
exploration discoveries on Block 402 in 1997 and one in early 1998, in
partnership with operator BHP. Two successful delineation wells were also
drilled in 1997.
Drilled in mid-1997, the Bir Sif Fatima North No. 1 (BSFN-1) well tested
5,570 BOPD. The well is located about four kilometers northeast of a discovery
on Block 403 announced by Agip in late 1996. A delineation well, the BSFN-2, was
drilled by partners in late 1997 and tested at 6,018 BOPD.
The partners drilled an additional discovery well about six kilometers
north of the BSFN-1 well, the Rhourde Oulad Djemma No. 1 (ROD-1). The ROD-1 well
tested 5,526 BOPD.
Located about five miles east of the BSFN Field, the Bir Sif Fatima No. 1
(BSF-1) well was a wildcat discovery made in January 1998. The BSF-1 well tested
1,960 BOPD. This is a separate field and the partners are planning a delineation
program to appraise the discovery.
Anadarko and BHP are currently evaluating the commercial potential of the
discoveries on Block 402 and drilling plans are ongoing. Anadarko owns a
27.5-percent interest in the BHP-operated Blocks 401 and 402, a 1.4 million-acre
area.
Developing the HBN/El Biar and Qoubba Fields. Development of the HBNS Field
was hastened by the fact that it lies entirely on acreage held by Anadarko.
Although both the HBN/El Biar and the Qoubba Fields were discovered by Anadarko,
these two Fields extend onto acreage held by other operators. Development
planning is underway on both Fields.
The HBN/El Biar Field was discovered in 1994 and is located in the north
portion of Block 404. The Field extends onto acreage held by Agip S.p.A.
Anadarko has drilled two successful wells in the HBN/El Biar Field to date; Agip
has drilled two successful wells in their portion of the Field. Anadarko and
Agip are working together on a Commerciality Report for the HBN/El Biar Field
that should be filed with SONATRACH in early 1998. Upon approval, the
Commerciality Report will be filed with the Algerian government in application
for an EL. An EL for the HBN/El Biar Field will allow the companies to begin
construction of production facilities. Currently, plans call for the
construction of a production train for the HBN/El Biar Field at Anadarko's CPF
for the HBNS Field. Depending on the issuance of the EL and the construction
schedule, first production from the HBN/El Biar Field is expected in 2000.
Discovered in 1994 by Anadarko, the Qoubba Field could end up being the
second largest oil field in Algeria. The Field extends south onto acreage
operated by Cepsa, a Spanish company. Anadarko and Cepsa each have drilled three
successful wells in the Qoubba Field. Development work will be done following
completion of a joint unitization and development plan that is being prepared by
both companies, in partnership with SONATRACH. During 1998, the parties plan to
begin development drilling in the Field. A Commerciality Report was completed
for the Qoubba Field and filed with SONATRACH in 1997. Upon approval, the
Commerciality Report will be filed with the Algerian government in application
for an EL. Depending on the issuance of the EL and the development schedule,
first production from the Qoubba Field is expected in 2001.
The Company plans to invest about $275 million in its Algerian operations
in 1998. Drilling plans include 45 wells, with four wildcat wells, eight
delineation wells and 24 development wells on Blocks 208 and 404 and nine wells
on Blocks 401 and 402.
Anadarko's interest in the Algerian Production Sharing Agreement (PSA) for
Blocks 208, 211, 245 and 404 is 50 percent before participation at the
exploitation phase by SONATRACH. The Company has two other partners, Lasmo and
Maersk, each with a 25-percent interest.
For additional information, see Properties and Activities -- International
under Item 1 and Marketing Strategies and Additional Factors Affecting Business
under Item 7 of the Form 10-K.
<PAGE> 9
Eritrea
Anadarko signed a PSA in September 1995 with the State of Eritrea's Ministry of
Energy and Mines, following the country's independence from Ethiopia in 1993.
The original PSA gave Anadarko exploration rights to 6.7 million acres in the
Red Sea -- an area known as the Zula Block. In 1997, the Company's acreage
position in Eritrea was increased by the signing of a PSA for an additional 2.3
million acres called the Edd Block. Anadarko now has exploration rights on 9.0
million acres (gross) in the Red Sea.
In December 1997, Anadarko signed a partnership agreement with Agip S.p.A.,
providing them with a 30-percent interest in Anadarko's Eritrean exploration
venture.
In less than three years, Anadarko's exploration venture in Eritrea has
matured from a conceptual study to drilling. The Company plans to drill three
exploration wells off the coast of Eritrea in the Red Sea during 1998. To
understand the offshore sensitivities and document the existing baseline
conditions, an environmental study was performed and a complete marine
Environmental Impact Statement was submitted to the Eritrean government in
preparation for drilling. The study provided the government with a comprehensive
data set for their offshore environment.
In early 1997, Anadarko completed a 4,600 kilometer seismic survey over the
Zula Block. The new seismic data were combined with 15,000 kilometers of
existing seismic data that were reprocessed. Numerous exploration prospects have
been identified on both blocks.
The first exploration well the Company plans to drill in Eritrea is the
Bulissar No. 1, located on the Zula Block. The well is expected to spud in May
1998. A second prospect located about 75 kilometers south of Bulissar -- the Edd
No. 1 -- is expected to be drilled on the Edd Block. A third prospect will be
selected with the aid of the drilling results from the first two wells. Anadarko
expects to spud all three wells during 1998. Water depths in this portion of the
Red Sea range from 200-250 feet.
Anadarko's drilling will be operated from the Eritrean port city of
Massawa. The Company has constructed a marine base camp and warehouse facility
that will manage supplies, as well as helicopter and boat support. In 1996, the
Company opened an office in Eritrea's capital city, Asmara. Anadarko owns a
70-percent interest in the Eritrean exploration venture.
Jordan
Anadarko has exploration rights on the 4.2 million-acre Safawi Block, located in
the northeast portion of the Hashemite Kingdom of Jordan. Anadarko is operating
under a PSA signed with the country's Natural Resources Authority in March 1996.
During 1997, Anadarko drilled a stratigraphic test well in Jordan -- the
QA-1. The well was a re-entry of an exploration target drilled by another
operator in 1990. The existing wellbore was deepened to evaluate source rock.
The results are currently being analyzed.
Anadarko opened an office in Amman, Jordan, in early 1997. Anadarko
operates the Jordan venture with a 50-percent interest.
<PAGE> 10
Peru
The Company's search for hydrocarbons is reaching into some of the world's most
isolated areas -- including the Ucayali Basin of east-central Peru in South
America. Anadarko has been exploring in this Amazon region since signing an
exploration license in September 1996 with PERUPETRO S.A., the state oil company
of Peru. Anadarko is operating under Phase I of a five-phase exploration
agreement.
Anadarko has exploration rights to a 2.56 million-acre area, known as Block
84, near the Brazilian border. During 1997, Anadarko acquired 600 kilometers of
2-D seismic data. In addition, a micro-seismic program is being conducted in the
northern portion of the Block. This innovative exploration technique relies on
the natural tremors of the earth's sub-surface for sound sources to provide
seismic data. The information will be combined with the 2-D seismic data to
provide the Company with a more accurate image of underlying structures. The
locations for these programs were derived with the aid of a 7,300 kilometer
aerial gravity survey that was flown in late 1996.
Exploration in Peru carefully balances environmental concerns and local
cultures of those living on Block 84. All operations are supported by helicopter
and boat to limit the environmental impact. A comprehensive Environmental Impact
Statement was completed in early 1997 and accepted by the Peruvian government.
The seismic data acquired in 1997 will be processed and interpreted and the
Company may elect to shoot an additional 600 kilometers of seismic in late 1998
or early 1999. Anadarko owns a 100-percent interest in Block 84 but may take
partners. Anadarko opened an office in the capital city of Lima in early 1997.
North Atlantic Margin
Anadarko added another new exploration opportunity in 1997 -- the North Atlantic
Margin, located north and west of Scotland and offshore Ireland. In two separate
bidding rounds, Anadarko and its partners were awarded five exploration areas
totaling 1.3 million acres (gross). Anadarko's net acreage position of about
377,000 acres now ranks the Company 19th in exploration acreage in the area.
Anadarko has been studying the exploration potential of the North Atlantic
since 1995 and emerged as a player in the United Kingdom's 17th Bid Round in
February 1997. The Company and its partners bid comprehensive work programs to
win awards on three tranches (a large group of blocks) located near the Hebrides
and Shetland Islands. The Tranches are No. 21, 61 and 63. The partners were
granted a nine-year exploration license with an initial work program of three
years. The information used to prepare for the 17th Bid Round was obtained
through a study group Anadarko joined in mid-1996. The Company also purchased
15,000 kilometers of 2-D seismic data. Exploratory leads have been identified on
all three tranches.
Anadarko will participate in an exploration well on Tranche 61 in August
1998, where the Company owns a 7.5-percent interest. Extensive seismic data
exist over Tranche 61. Anadarko and partners have acquired 550 square kilometers
of 3-D seismic and plan to shoot an additional 250 square kilometers of seismic
during 1998. Anadarko has a 50-percent interest in the offsetting Tranche No.
63.
Anadarko and partners were awarded two exploration areas in Ireland's Bid
Round, held in June 1997. Anadarko has a 33-percent interest in these areas,
operated by British Gas Exploration and Production (British Gas) and ARCO.
Exploratory drilling on these prospects could be conducted in 1999. With British
Gas and ARCO, the Company is participating in the study of the Ireland sector.
Both study periods last through 2002. Anadarko and its partners currently have
80,000 kilometers of 2-D seismic data and 5,000 square kilometers of 3-D seismic
data.
Water depths in this region of the Atlantic Ocean range from 3,000-5,000
feet, which means difficult operating conditions. Prospect sizes must be large
to be commercial. Nevertheless, this is a proven petroleum system being explored
and developed with proven technology. Two production platforms are now on-line
in the region. Anadarko carefully selected its partners in this venture,
capitalizing on their experience in deepwater plays around the world.
<PAGE> 11
Tunisia
In late 1997, Anadarko became a 50-percent partner in an exploration venture in
southern Tunisia operated by Agip S.p.A., along with L'Entreprise Tunisienne
D'Activites Petrolieres (ETAP), the oil and gas enterprise of Tunisia. The
384,000 acre exploration area is known as the Jenein Nord Block.
The Block is located near the Algerian border in the Tunisian Ghadames
Basin and is contiguous with the BHP-operated Blocks 401 and 402 in Algeria
where Anadarko and partners have made five discoveries. Agip, in partnership
with the Tunisian government, has operated in-country for more than 30 years.
The Jenein Nord Block is located about 10 miles south of the one billion-barrel
El Borma Oil Field, discovered by Agip in 1964.
During 1997, Agip completed a 373-kilometer seismic acquisition program on
the Jenein Nord Block and is reprocessing approximately 600 kilometers of
existing seismic data. The reprocessing should be complete in the first quarter
of 1998. Based on this information, several exploration leads have been
identified and drilling could begin in late 1998. If a commercial discovery is
made on the block by the partners, Agip's existing oil field infrastructure
could allow for early production.
Exploration in Tunisia allows Anadarko to utilize its operating experience
from the Berkine Basin of Algeria. Anadarko will continue to evaluate other
exploration opportunities in this area of the world.
<PAGE> 12
STOCKHOLDERS' INFORMATION
The common stock of Anadarko Petroleum Corporation is traded on the New
York Stock Exchange. Average daily trading volume was 265,000 shares in 1997,
226,000 shares in 1996, and 288,000 shares in 1995.
The ticker symbol for Anadarko is APC and daily stock reports published
in local newspapers carry trading summaries for the Company under the headings
ANADRK or ANADRKPETE.
The following shows information regarding the closing market price of and
dividends paid on the Company's common stock by quarter for 1997 and 1996.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1997
Market Price
High $72.25 $65.63 $75.69 $76.25
Low $54.63 $50.88 $61.50 $57.19
Dividends $0.075 $0.075 $0.075 $0.075
1996
Market Price
High $57.50 $60.38 $60.50 $68.75
Low $46.75 $52.00 $51.13 $55.63
Dividends $0.075 $0.075 $0.075 $0.075
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Anadarko Petroleum Corporation:
We consent to the incorporation by reference in the following registration
statements of Anadarko Petroleum Corporation of our report dated January 29,
1998, relating to the consolidated balance sheets of Anadarko Petroleum
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1997, which
report appears in the December 31, 1997 annual report on Form 10-K of Anadarko
Petroleum Corporation.
(a) Forms S-8 and S-3, Anadarko Petroleum Corporation 1986 Stock Option Plan
(No. 33-8496).
(b) Forms S-8 and S-3, Anadarko Employee Savings Plan (No. 33-8643).
(c) Forms S-8 and S-3, Anadarko Petroleum Corporation 1987 Stock Option Plan
(No. 33-22134).
(d) Forms S-8 and S-3, Anadarko Petroleum Corporation 1988 Stock Option Plan
for Non-Employee Directors (No. 33-30384).
(e) Form S-3, Anadarko Petroleum Corporation Shelf Registration Statement
for $300 million of Equity or Debt Securities (No. 33-50717).
(f) Form S-8, Anadarko Petroleum Corporation 1993 Stock Incentive Plan (No.
33-54485).
[KPMG PEAT MARWICK LLP]
Houston, Texas
March 18, 1998
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Officer and/or
Director of ANADARKO PETROLEUM CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint SUZANNE SUTER and MICHAEL E.
ROSE, and each of them, his true and lawful attorney and agent to do any and
all acts and things and execute any and all instruments which, with the advice
of Counsel, said attorney and agent may deem necessary or advisable to enable
the Company to comply with the Securities Act of 1934, as amended, and any
rules, regulations and requirements of the Securities and Exchange commission
in connection with the filing under said Act of the Form 10-K Annual Report,
including specifically, but without limitation thereof, to sign his name as an
Officer and/or Director of the Company to the Form 10-K Annual Report filed
with the Securities and Exchange Commission, and to any instrument or document
filed as a part of, or in connection with, said Form 10-K Annual Report or
amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned have subscribed these presents
this 29th day of January, 1998.
[ROBERT J. ALLISON, JR.] [JAMES L. BRYAN]
- ------------------------------ -------------------------------
Robert J. Allison, Jr. James L. Bryan
[CONRAD P. ALBERT] [JOHN R. BUTLER, JR]
- ------------------------------ -------------------------------
Conrad P. Albert John R. Butler, Jr.
[LARRY BARCUS] [JOHN R.GORDON]
- ------------------------------ -------------------------------
Larry Barcus John R. Gordon
[RONALD BROWN] [JOHN N. SEITZ]
- ------------------------------ -------------------------------
Ronald Brown John N. Seitz
[MICHAEL E. ROSE] [J. R. LARSON]
- ------------------------------ -------------------------------
Michael E. Rose J. R. Larson
[SUZANNE SUTER]
- ------------------------------
Suzanne Suter
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<FISCAL-YEAR-END> DEC-31-1997
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0
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